A decade ago less than 1% of small to medium enterprises (SMEs) had any type of financial lines insurance. Fast forward to now, and with more and more companies facing litigation in connection with management risks and exposures, management liability insurance is now considered a ‘must have’ for Australian businesses.
What’s the difference between management liability (ML) and directors’ and officers’ (D&O) Insurance?
Often considered interchangeable, ML and D&O are different insurance solutions. While management liability insurance did start as an offshoot of the public company focused D&O insurance, it’s a much broader form of cover. It’s designed for SME businesses and provides cover for those accused of failing in their responsibilities as managers (in addition to some common business risks facing the company).
D&O is intended for larger companies and provides cover for those accused of failing in their duties as directors and officers (both past and present), essentially for the benefit of directors and officers only.
What does management liability cover?
According to insurer Vero, management liability can include:
- D&O cover
- Company liability
- Employment practices liability (loss arising from claims brought by employees (past or present) alleging discrimination or harassment)
- Crime loss cover (including investigation expenses)
- Tax audit expense cover
- Cover for pecuniary penalties incurred by insured persons/the company
- Cover for the cost of representing insured persons and the company at WH&S investigations
- Cover for the costs of representing insured persons at certain other official inquiries.
Essentially ML is designed to cover damages and claimant costs awarded against you, legal cost, investigation costs, fines and penalties.
Hopefully the above helps you to better understand these insurance solutions. Remember that every business is unique, which means you face unique risks and challenges and should get advice from your trusted insurance broker about the type of insurance solution that’s right for you.