What is Management Liability Insurance, and do i need it?

Following on from our post on The Importance of D&O Insurance in a Post-Pandemic era, we look at what Management Liability insurance is and who it is aimed at protecting. 

 

 

It is a package policy designed to cover any incorporated business or charity with three main heads of cover against any ‘Wrongful Acts’. They are – 

 

 

 

The definition of ‘Wrongful Act’ varies by insurer, though includes – 

 

 

 

Let’s look at each of the three heads of cover in turn - 

 

Directors & Officers (D&O) 

 

This is the main head of cover protecting the decision makers within a company or charity if held personally accountable for their actions and can be taken in isolation. 

 

If you’re a Director, Officer, Senior Manager, Trustee, etc of a company, you are personally exposed to legal claims being brought against you for alleged ‘wrongful acts’. This can be by regulatory bodies like the Health & Safety Executive, Information Commission Officer, etc or any stakeholders including its shareholders, creditors, co-workers, competitors, etc. 

 

Corporate Legal Liability (CLL) 

 

Defends claims being brought against the company and is a package cover that is taken out in addition to D&O only. 

 

Claims range from the maladministration of a company pension, an employee benefit claim, breach of data protection, corporate identity crime, defence costs of health and safety breaches, etc. 

 

Employment Practices Liability (EPL) 

 

This is where we see the highest proportion of claims. 

 

It provides cover arising from an Employment Dispute covering the cost of defending, investigating and settlement against allegations of unfair dismissal, sexual harassment, discrimination etc by current or ex-employees. 

 

 

Every business and/or charity is exposed to claims of this nature and it is recommended they strongly consider a policy primarily to protect the financial interests of the decision makers personally, and their own. 

 

It is important to remember that whether a ‘wrongful act’ has been committed or not, there is still the cost of investigating and defending any allegations, which can be a costly and time-consuming process.