The bungled 60 Minutes child abduction attempt on a suburban Beirut street last month illustrates just how easily things can suddenly and unexpectedly go wrong for a company and how senior management can suddenly find themselves in hot water.
On 30 April, The Australian newspaper reported on the legal problems facing the Nine Network and its senior management in the wake of the botched attempt to reunite mother Sally Faulkner with her two children in Lebanon:
“The Nine Network and some of its most senior executives are at risk of conspiracy charges in the wake of the botched kidnapping attempt in Lebanon. While Lebanese authorities are still considering charges against the freed 60 Minutes crew that flew to Lebanon to film the attempted abduction, legal experts have identified a further threat confronting the network and its executives under Australian law.”
When a corporation such as the Nine Network, with its formidable legal resources, can suddenly find itself in legal trouble, smaller businesses without those same resources can find themselves particularly vulnerable.
It’s cases like the one currently facing Nine that demonstrate how you and your business could be exposed to personal liability or expensive litigation. How would your business cope if suddenly faced with a hefty fine from a government authority, a legal bill of thousands of dollars, or defending allegations of unfair work practices by a disgruntled employee?
Management Liability insurance can protect the company, its directors and officers against the risks faced in the day-to-day running of the business.
Without adequate protection, you could risk losing not only your business, but also your personal assets. As Management Liability protects you personally, it therefore protects your wealth and lifestyle.
It’s important to understand that Management Liability insurance is different to Professional Indemnity insurance.
While Professional Indemnity covers the activities of the business, Management Liability focuses on the act of running the business.
Whereas Professional Indemnity insurance provides protection for claims from third parties in respect of providing professional or specialist services, Management Liability insurance protects your business against claims of company mismanagement causing loss to others.
What businesses should be covered for management liability?
Any business that could be exposed to claims of mismanagement should consider this cover. Businesses involved in highly regulated industries, however, are at particular risk:
- Professional services firms (eg. accounting, legal, real estate, engineering and IT)
- Manufacturing and distribution
- Road transport and logistics
- Construction
- Medical practitioners
- Services (eg. community services, call centres and beauty)
- Tourism and hospitality (eg. cafes, restaurants and travel agencies), and
- Trades.
What does management liability cover?
Management liability offers tailored protection for the unique risks of your business, but generally, the following types of cover are available.
Directors & officers liability
This provides protection for any claim alleging a wrongful act, such as negligence, misrepresentation or breach of duty by a director or officer.
Generally, past, present and future directors and officers as well as anyone else involved in the management of a business are covered for claims alleging a wrongful act. Employees can also be covered.
Claims may include unfair competition, fraud, misappropriation of trade secrets, insolvent trading or even manslaughter.
Employment practices liability
This protects the company, directors, officers and employees for claims made by current, past and prospective employees in relation to employment practices such as bullying, discrimination, harassment or unfair dismissal.
Statutory liability
This protects certain individuals and the company for any formal investigation by a regulatory, government, professional or other authorised body. Coverage includes defence costs and any resulting statutory fine (subject to policy terms).
Claims may include occupational health and safety penalties, EPA and other civil penalties.
Company liability
This protects the company for costs incurred in defending and settling third party claims. Cover can also be extended to include crime loss, internet liability and tax audit costs.
Claims may include wrongful act or fraud or shareholder disputes.
Common Management Liability claims:
- Breaches of director’s duties and/or fiduciary duties, including breach of trust.
- False, misleading and deceptive conduct by directors, officers and employees.
- Actions alleging improper and illegal conduct.
- Statutory breach of duty (i.e. under legislation).
- OH&S prosecutions and inquiries.
- Unfair or wrongful dismissal, discrimination, harassment, wrongful failure to employ or promote.
- Defamation by directors or officers.
- Breach of intellectual property rights by directors or officers.
- Employee theft, including theft of money and property.
- Statutory fines and penalties.
- Taxation investigation costs.
Talk to a Westlawn Insurance Broker
There are a number of insurers offering Management Liability insurance policies to Australian businesses, with differences between each in terms of limits and sub-limits, cover available, exclusions and policy wordings.
To discuss Management Liability insurance and the various options available to your business, contact Westlawn Insurance Brokers today:
- Call us on 1300 WESTLAWN (1300 937 852)
- Email us at insurance@westlawn.com.au
24 May 2016
Westlawn Insurance Brokers Pty Ltd ABN 65 075 847 291 AFSL No. 246520
