Management Liability Insurance – sometimes called Directors & Officers Insurance – protects the personal assets of corporate directors and officers, and their spouses, in the event they are personally sued by employees, vendors, competitors, investors, customers, or other parties, for actual or alleged wrongful acts in managing a company. Management Liability insurance policies offer liability cover for company directors and managers to protect them from claims which may arise from the decisions and actions taken within the scope of their regular duties.
With an increasing trend for regulators and stakeholders to hold directors and officers personally responsible when problems arise, their personal assets are at stake. And while the liability of a company is limited, a director’s liability is unlimited. That’s why Management Liability cover is so important in today’s business world when it comes to attracting and retaining key people.
The reality is that decision makers often make mistakes and can become personally legally liable for them. They constantly walk a fine line making tough and complex decisions with huge implications.
It includes cover for defence costs and expenses, investigation costs and extradition costs. Considering that even simple investigations can cost thousands, if not hundreds of thousands of pounds, purchasing management liabilty insurance makes pure financial sense.
Companies purchase Management Liability cover because managers can make mistakes. Management Liability coverage includes financial protection for managers against the consequences of actual or alleged “wrongful acts”. Policies cover the personal liability of company directors but also the reimbursement of the insured company in case it has paid the claim of a third party on behalf of its managers in order to protect them.
It’s riskier than ever at the top
The directors and managers in your company are in a position of responsibility. Managers, directors and supervisors can face allegations and claims for which they may be personally liable. Even in a company with limited liability status, personal liability is unlimited.
Directors and Managers are under increasing scrutiny, and it is commonplace for allegations of wrongful acts to be made. Any allegations of wrong-doing need to be investigated and defended, and this can cost a significant amount even if the case doesn’t reach court. This means directors and managers personal finances are at risk. So it’s essential that companies provide protection with Management Liability Insurance.
Why is this so important for businesses to have in place?
- Litigation is easy to access and increasingly employees know their employment rights and seek to sue individuals rather than the company self when things go wrong.
- Legal liability is shifting away from companies towards personal liability. Corporate manslaughter is an example of where personal accountability is pursued in both criminal and civil settings. Proceedings often being served upon the company and individuals.
- Regulated industries are particularly susceptible to claims. Enforcement and supervisory bodies are becoming increasingly proactive in investigating companies and individuals within them.
The cost of defending an allegation can be enormous, and without the cover, you will be left to cover the costs (and any subsequent damages or awards) personally.
Actions against the company and its management can involve a high degree of personal liability for the individuals. With potential penalties that range from hefty fines, all the way to disqualification and possible imprisonment, the need for an immediate and effective response to any threat is clear.
With threats and legal action becoming more commonplace in the UK, please contact us to discuss Management Liability insurance.
