Management liability involves several types of insurance that protect your business’s day-to-day operations. By covering this area of your business, you’re protecting everything from key company leaders and employee benefits to your method of hiring and dismissing workers.
Management liability insurance is a broad term for insurance that protects companies from the hazards of running a business. It also protects key leaders from harm related to mismanaging the business.
Management liability insurance includes coverage for board leaders and employer practices. Some people use the terms management liability and directors and officers liability interchangeably.
What does management liability insurance cover?
Multiple types of business insurance can safeguard your business’s management liability:
Directors and officers liability (DO) — Protects key leaders of your company from claims that they mismanaged business or behaved inappropriately toward employees.
Employee crime — Defends your business against financial loss because of an employee’s criminal act or theft from someone outside your company.
Employment practices liability — Guards against harm, abuse or misuse related to how your company manages its employees. This can include hiring and promoting employees as well as personal behavior between coworkers.
Fiduciary liability — Covers your business if employees or their dependents claim your company mismanaged benefits like healthcare or investments.
Kidnap and ransom — Helps your business recover employees or documents and pays for the kidnappers’ financial demands if needed.
What type of expenses am I covered for?
Management liability insurance pays expenses for your business’s legal defense in court for covered claims, including court and lawyer fees. It can also pay for court settlements to the person suing you if the judge deems your company responsible.
How much does management liability insurance cost?
Most midsize companies can expect to pay between $5,000 to $10,000 for most types of management liability policies like DO insurance. However, small companies might pay a few thousand dollars or less since they encounter fewer risks during daily operations.
Case study: Krueger Media’s DO policy
When Krueger Media expanded its business and employees, the company bought directors and officers liability insurance. The midsized company paid $5,000 per year for the policy. When a client filed a complaint against the company’s CEO, Krueger Media’s insurance paid $250,000 to settle the court case.
Which companies offer management liability policies?
Who does management liability insurance protect?
Management liability coverage protects company leaders and employees involved in managing the company. That may include:
The company or organization itself
Board of directors
Chief executive, operating and financial officers
Secretary in charge of keeping company documents
What claims does management liability coverage protect against?
Your company could face a variety of claims for not meeting legal standards or performing required responsibilities. Examples include:
Breach of directors’ duties — A chief officer in your company may act outside their office’s responsibilities or fail to perform certain duties.
Embezzlement of company funds — Employees may claim a coworker stole money from your business, leading to an investigation.
Employment issues — Employees could claim unfair dismissal, discrimination, sexual harassment or failure to hire or promote a qualified worker.
Forgoing regulations — The state or federal government might find your business guilty of breaking business laws and regulations.
Occupational health and safety issues — Customers or employees may claim the company breached health and safety laws.
Pollution — Federal or state officials may claim your business caused pollution, such as an oil spill.
Shareholder action — Investors may sue your company for mismanaging their investment or not achieving promised growth.
What’s not covered?
Most management liability policies exclude situations that involve:
Bodily injury or property damage. Management liability may not cover physical injuries, emotional distress, sickness or damage to others’ belongings in all cases. These areas may need coverage under another type of liability insurance.
Dishonest or criminal intent. Your business may not get protection for a loss related to wrongful acts committed with reckless, dishonest or criminal intent. This may include using your position or private information to cause harm to your company.
Insured vs insured cases. Insurance may not cover all court cases where one employee under your company’s insurance policy files a claim against another employee covered by the company’s insurance.
Known claims and circumstances. Claims made before the start date of your insurance policy will not receive coverage.
Personal profit. If key leaders gain any personal profit, financial advantage or illegal compensation from a claim, they may not get protection.
Your company faces many challenges to run daily operations, including promoting new employees and managing growth. And sometimes those challenges lead to claims that you’ve mismanaged in some way. To keep your business running and protect it during possible claims, find the right business insurance for your company.
Common questions about management liability insurance
Management liability insurance protects against claims of mismanaged business operations. Professional liability insurance covers claims related to your company’s professional services, such as consulting advice or accounting errors.
Businesses with high revenue, high net-worth employees or those doing business globally should consider this insurance. However, other businesses can also benefit from the peace of mind and protection it offers.
Your business can benefit from directors and officers liability because it offers personal protection for key leaders in your company. Talented leaders may not be attracted to companies without this coverage. You may also need DO insurance to gain venture capital or other investments.
Willam Eve is the country manager for Finder's Canada operations. He has previously held the positions of group publisher of insurance for Finder Australia and lead publisher for the Finder global team. William has a Bachelor of Communications from the University of Technology Sydney, Australia. He loves the challenge of launching Finder into new markets while helping grow Finder’s global team.
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