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Management Liability

What is Management Liability Insurance?

  • Management Liability protects the individuals and the company in relation to the exposures associated with managing a company. The key elements to the cover are as follows:
    • Directors & Officers: Covers the Directors and Officers (including where the company can reimburse the directors) for any claim
      alleging a Wrongful Act (negligence, breach of duty, misrepresentations) by Director or Officer.
    • Company Cover: Covers the Company where there is a claim against the entity alleging the wrongful acts
    • Employment: Covers the Company for claims alleging an employment breaches including wrongful dismissal, discrimination, harassment, deprivation of career opportunity, breach of contract, etc.
    • Trustee: For trustees of staff superannuation fund.
    • Crime: Covers the Company for theft by it’s employees.

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.

Why do you need Management Liability?

  •  The exposures associated with managing a business are the vast and numerous and it is often the one exposure that is not addressed in insurance programs.
  • All companies insure the tangible exposures of property damage and bodily injury, however the key economic exposure of the ‘management risk’ has often remained uninsured.

What are Management Exposures?

  • A company and it’s directors face both personal and corporate liabilities from numerous stakeholders  include the following: Shareholders, Employees, Competitors, Regulators, Customers, Liquidators /  Administrators, Creditors.

Management Liabilities – Recent Claims Examples

Claims: Employment Practices Liability – Wrongful Termination

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.

Claims: Occupational Health & Safety

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.

Claims: Altered Cheques

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.

Claims: Unfair Competition

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.

Claims: Theft of a trade secret

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.

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