What is management liability insurance and what does it cover?
Management liability losses can arise generally from four key aspects, people, finance, regulations and customers or suppliers. Management liability claims are increasing and even seemingly petty allegations can cost companies time, defence costs and can be harmful to a company’s reputation.
Management liability insurance provides cover for financial losses arising from legal defence costs, judgements, some fines and penalties alleging mismanagement or wrongful acts of the company’s directors, officers, managers, administrators, and board members.
Covers provided are: –
- Employment practices liability
- Directors’ and officers’ liability
- Crime
- Corporate liability
- Statutory liability
- Defence costs
Some policies also have additional covers such as tax audit and basic cyber cover.
Who needs management liability insurance?
Anyone running a small to medium business in Australia needs the protection of a management liability insurance policy.
Australia is one of the top three most litigious countries in the world. There is a lot of responsibility that comes with running a business in a highly regulated business environment like we have in Australia. Management liability insurance has been developed to form part of your business’s risk management framework and provide your business and its directors with a safety net.
Financial losses arise when the company and or its directors have not met or are alleged to have not fulfilled their duties. There are currently approximately 800 laws and regulations businesses face to varying degrees and the regulatory environment is constantly changing.
We are seeing a rise in management liability claims with more frequency and severity.
How much does it cost?
The premiums are determined based on the company’s turnover, staff numbers, occupation and loss history. Small business management liability premiums start as low as $1,100.00.
What information is required to obtain quotations?
To provide an estimate of the premium we need to know your occupation, turnover, staff numbers and details of any losses the business has suffered. This may include employment related matters, statutory fines and penalties amongst other losses. We also need to know of uninsured losses, where the entity was uninsured at the time the loss occurred. Once the estimate is accepted, we would require a fully completed proposal form and the company’s financials to request that the insurer considers removal of the insolvency exclusion.
What is the insolvency exclusion?
The insolvency exclusion is applied to all management liability policies automatically. It is only removed when the insurer can examine your financials to ensure you have enough cash flow to meet your current liabilities.
If the insolvency exclusion is removed, the insurer will then defend any matters that may arise connected with the insolvency, bankruptcy, receivership, or administration of the company. This could also include an “alleged” inability to meet your debts when they fall due.
As an example of this, a disgruntled employee or one of your suppliers that you have a dispute with over a debt, could attempt to place you into liquidation or receivership for failure to pay a debt. This would result in you being required to prove that the allegation is false. This is something that is relatively easy for an ex-employee or customer to do if they want to.
Who needs management liability insurance?
Anyone running a small to medium business in Australia needs the protection of a management liability insurance policy.
Australia is one of the top three most litigious countries in the world? There is a lot of responsibility that comes with running a business in a highly regulated business environment like we have in Australia. Management liability insurance has been developed to form part of your business’s risk management framework and provide your business and its directors with a safety net.
Financial losses arise when the company and or its directors have not met or are alleged to have not fulfilled their duties. There are currently approximately 800 laws and regulations businesses face to varying degrees and the regulatory environment is constantly changing.
We are seeing a rise in management liability claims with more frequency and severity.
How much does it cost?
The premiums are determined based on the company’s turnover, staff numbers, occupation, and loss history. Small business management liability premiums start as low as $1,100.00.
What information is required to obtain quotations?
To provide an estimate of the premium we need to know your occupation, turnover, staff numbers and details of any losses the business has suffered including employment related matters, statutory fines, and penalties etc. even the entity was uninsured and did not have a management liability policy at the time the loss occurred. Once the estimate is accepted, we would require a fully completed proposal form and the company’s financials to request that the insurer considers removal of the insolvency exclusion.
What is the insolvency exclusion?
The insolvency exclusion is applied to all management liability policies automatically. It is only removed when the insurer can examine your financials to ensure you have enough cash flow to meet your current liabilities.
If the insolvency exclusion is removed, the insurer will then defend any matters that may arise connected with the insolvency, bankruptcy, receivership, or administration of the company. This could also include an “alleged” inability to meet your debts when they fall due.
As an example of this, a disgruntled employee or one of your suppliers that you have a dispute with over a debt, could attempt to place you into liquidation or receivership for failure to pay a debt. This would result in you being required to prove that the allegation is false. This is something that is relatively easy for an ex-employee or customer to do if they want to.
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