When a breach of company law or regulation is alleged, the focus is on your conduct as a manager and as a company. You may think a claim is completely baseless or without merit, but it will still cost time and money to defend successfully.
Scenario: A supervisor was terminated by his employer for smoking in a restricted area of the building. The terminated employee sued his employer for wrongful termination based on age discrimination from comments made by the supervisor such as “you’re too old”. The employee further alleged he could only be terminated for good cause, although he had a history of poor performance issues. The dismissed employee sought back pay, front pay, damages, and legal fees totalling an estimated $275,000.
Outcome: The employer settled with the dismissed for $350,000 and paid $130,000 in defence costs.
Scenario: During a busy time, the Company employed a part-time contractor who caught his hand in a machine and lost two fingers. This resulted in a full occupational health and safety investigation.
Outcome: The Company was found liable for $100,000 plus $45,000 in defence costs.
Scenario: A debtor clerk misappropriated $200,000 by altering cheques received from debtors. The clerk named themselves as the payee, and continued a cycle of paying debtors accounts with funds from other debtors over a period of eighteen months. This continued until her absence from work when the fraudulent scheme was discovered.
Outcome: Total loss to the wholesaler amounted to $300,000.
Insured: Privately owned Company, employing 20 people and an annual revenue of $650,000.
Scenario: CEO of privately held company left to start a new software company and was subsequently sued individually as an officer of the new company by his former employer. The allegations included trademark infringement and unfair competition as the former employer claimed that he had taken a corporate license to market a particular software product.
Outcome: Defendant settled for a payment of $250,000 with expenses of $130,000.
Scenario: Company ‘A’ sued directors and officers of competing Company ‘B’ after three employees of Company ‘A’ left to join Company ‘B’. Company ‘A’ alleged that the three were still in the employment of Company ‘A’ when they began sharing proprietary information with Company ‘B’. Company ‘A’ claimed theft of trade secrets.
Outcome: After one year of legal proceedings the case settled with Company ‘B’ paying Company ‘A’ a $160,000 settlement and incurring $355,000 in defence costs.
Management Liability protects the individuals and the company in relation to the exposures associated with managing a company.