When you’re running a business, you may be personally liable for any actual or alleged breaches of the Corporations Act. And it’s not just large companies that are exposed – small and medium business owners and officers could be at risk as well.
Management liability insurance covers the costs of defending directors, managers and employees against any claims that are the result of their actions or decisions.
If you are faced with unexpected liability costs, management liability insurance can protect your business and personal assets, such as your home, from being sold to cover the cost of paying claims.
Management liability insurance policies vary in the benefits they provide.
To give you an idea, here’s the type of cover that your policy may include:
Type of cover
Employment practice liability
Covers payouts for claims of employment breaches, such as wrongful dismissal, bullying or discrimination.
Directors’ and officers’ liability
Protects your proprietary limited companies past, present and future directors, officers and managers against claims of wrongful acts, such as misrepresentation or breach of duty (subject to business size).
Protects your business against claims such as employee or third party fraud (not all criminal activity is covered).
Covers costs that your business would incur if you need to defend and settle claims from outside parties alleging wrongful conduct, as well as investigation into the affairs of the company.
Covers the cost of defense, fines and penalties under some statutes (e.g. Work Health and Safety).
Tax Audit Costs
Any reasonable fees, charges or disbursements of an accountant or registered tax agent who is engaged by the company for work undertaken in response to a tax audit notice.
Covers your legal costs if your business ends up in court.
A former employee claims they were wrongfully dismissed from your business because they were unwell at the time their position was terminated. They want to be reinstated to their role and remunerated for their loss of income while they were out of work. After numerous unsuccessful conciliation attempts, the matter is brought before a court and they have to pay damages to your former employee.
A Management Liability policy allows you to recover some or all of these costs so you can continue to run your business without having to sell your business or personal assets. Depending on your policy, you may be able to make a claim for your legal defense costs, as well as the amount paid to your former employee.
Important note – the information provided here is general advice only and had been prepared without taking into account your objectives, financial situation or needs. A product disclosure statement (PDS) is available from your insurance broker. You should consider the PDS in deciding whether to acquire, or continue to hold, business insurance.