Management liability insurance is a package that protects a company and the people who run it against the range of claims that come with managing a business. It usually combines three covers: directors’ and officers’ liability, which protects individual directors; corporate legal liability, which protects the company itself; and employment practices liability, which covers claims from employees such as unfair dismissal or discrimination. It is aimed at private companies, not just listed ones.
Running a company creates exposures that ordinary business insurance does not touch: personal claims against directors, regulatory action against the company, and employment disputes with staff. Management liability bundles the covers that answer those risks into one policy.
What does management liability insurance cover?
Most policies bring together three elements. Directors’ and officers’ cover protects individual directors and officers against personal liability for their decisions. Corporate legal liability protects the company against claims and investigations brought against the business itself. Employment practices liability covers claims by employees, such as unfair dismissal, discrimination or harassment. A policy can be bought with all three or tailored to the exposures that matter.
How does it relate to directors’ and officers’ cover?
Directors’ and officers’ liability is the core of a management liability package, but on its own it protects only the individuals. Management liability wraps the company’s own exposures and the employment risks around it, so both the people and the business are covered. Our guide to directors’ and officers’ liability explains that element in detail.
Does a small or private company need it?
Yes, often more than a large one. Directors of private companies and not-for-profits carry the same personal exposure to claims from employees, HMRC, creditors and regulators, but with fewer resources to absorb the defence cost. Employment claims in particular can hit any employer regardless of size. Management liability is designed to be accessible to smaller companies, not only large corporates.
What does it not cover?
Like its component covers, management liability excludes matters such as fraud and dishonest conduct once established, and it is not a substitute for public liability or professional indemnity, which deal with injury, damage and professional negligence. It covers the management and employment exposures, not the operational ones.
Getting the cover right
Which elements a business needs, and the right limits, depend on its size, sector and how it is run. A broker can put together the combination that fits rather than selling a fixed bundle. To review your commercial cover, get a quote or speak to the team.