You’ve earned your stripes and are now in a position of responsibility in your organisation, either as the owner or management. You want to continue kicking goals, but if something goes wrong your business may be liable for the costs of your mismanagement and in some instances you may be personally liable, for example if you were acting as a Director.
Management liability insurance covers you against the risks and exposures of managing a business. Not to be confused with professional indemnity insurance, which covers the ‘activities’ of the company, management liability insurance focuses on your day-to-day decisions in running the business. The policy is designed to protect your personal assets as well as your business assets.
In an increasingly litigious world, small businesses often have the same legal regimes as large multinationals, and the consequences can be costly for a management slip-up.
Just the cost of defending yourself can be crippling for you and your business. The right policy can cover you for legal and defence costs, statutory fines, employee disputes, defamation and much more.
Jeremy Scott-Mackenzie, AIG’s Australasian Commercial Institutions Manager for Financial Lines, told Insurance & Risk Professional magazine that in the eyes of the law, there was no difference between management in a company large or small. That is where a management liability insurance policy can give small business owners the firepower they need in the event of an issue.
“But smaller companies won’t necessarily have the risk management, the legal team, the compliance team, or indeed the financial resources to deal with a lot of these complex and expensive pieces of litigation,” he said.
In recent years, the increasing number of data breaches have led to governments increasing legislation around the management of customers’ personal details. Slipshod oversight can leave company directors or managers liable if they don’t get serious about securing personal data. In Australia, the Notifiable Data Breaches scheme took effect in February 2018 with much more rigorous rules around reporting breaches.
Jaydon Burke-Douglas, Speciality Risks Practice Leader for underwriter DUAL Australia’s management liability products, said: “The vast majority of privacy breaches in Australia today aren’t via hacking – it’s when your employee gets their laptop stolen from a pub, it’s somebody leaving a memory stick on the train, it’s leaving your iPhone in the back of a taxi.”
As director of a company, you are liable for the key decisions made in your business. When choosing a policy to protect yourself, it is important you are across all exclusions and inclusions.
Dealing with people can lead to tricky situations. Unfair dismissal cases, claims of mishandling sexual harassment complaints or failing in your duty to manage company finances can all expose the manager to legal action.
Management is in the headlines: whether for the safety of music fans at festivals, the care of the elderly in nursing homes or the ongoing search to lay responsibility at the feet of someone over the Opal Tower debacle. Getting it right is becoming more important.
A broker can work with you to customise a policy that covers your needs. They can help you mitigate risks of which you may not even be aware. Pay particular attention to the wording of the policy and discuss with a broker how a variety of insurance companies would respond to your claims.
The kinds of events covered by management liability policies can happen to businesses across the board. Large or small, it should be part of your risk management. A mismanagement claim can lead to hefty expenses, which can severely damage any business. And for small businesses, it may put them on the fast track to going bust.