We understand that finances are tight at the moment and that no-one wants to pay more for their insurance than they really have to. Therefore, any insurance that you take that goes beyond your legal requirements needs to be seriously considered.
In this blog we are going to be looking at management liability, what is it and why you should or shouldn’t consider it?
What is management liability insurance?
Management liability insurance is designed to cover the costs of legal action from allegations of wrongdoing brought about by the actions of a company or its directors. It aims to protect the company and the individuals in management financially against their legal liabilities, commonly providing cover for legal expenses, damages and settlements against specific types of legal and criminal claims.
The three key areas to a management liability policy are:
- Directors and Officers Liability
A Directors and Officers policy is designed to protect the personal wealth of a company’s director and any other member of management from the legal costs and awards in defending against civil, criminal and regulatory claims or investigations.
- Employment Practices Liability
This covers the directors of a business from claims from potential, current and former employees alleging breach of contract and employment law.
- Corporate Legal Liability
Claims can be made against the directors and officers and also the business itself in tandem. This cover protects the legal entity (business) from defence costs incurred relating to civil, regulatory claim or investigation.
Do you need it?
According to The BLM App regulatory bodies have given UK SME’s fines totalling over £100m, highlighting that no matter what your business you can be at risk of financial loss both personally and as a business.
Aviva have looked at this in more detail and have given six reasons why they think you should have management liability insurance.
- Your personal assets may be at risk
If you’re a director your personal liability is unlimited. This means that if someone accuses you of committing a wrongful act, even if you didn’t do it, your personal assets are at risk. After all, legal defence costs add up even if you’re not guilty.
- The size of your business doesn’t matter
Legal action is expensive regardless of how big or small your business is. You can still face charges for breach of contract, health and safety issues or employment-related claims even if you don’t have a board of directors.
- There are risks all over the place
Claims can come from different sources. It could be from shareholders and investors who think you’re personally responsible for their loss, or from unhappy customers, clients, employees and regulatory bodies.
- You could be blamed if the business goes bust
If your company is facing financial problems, you could be held personally liable for not acting in the best interest of your creditors. With management liability insurance, you’ll be covered against claims for a breach of a legal duty. So whether it’s creditors, liquidators or shareholders on your case, you’ll be protected.
- You’re Professional Indemnity may not be enough
Professional indemnity insurance covers the company itself. So, you might not be protected if someone makes a claim against you for wrongful acts. With directors and officers liability cover, you can rest better at night knowing you’ll be covered.
- Protection if you’re business suffers a cyber attack
There are around 65,000 attempts to hack small- to medium-sized businesses (SMBs) occur in the UK every day, around 4,500 of which are successful. That equates to around 1.6 million of the 5.7 million SMBs in the UK per year. With attacks occurring on such regularity, it might be concerning to hear that you could be held personally liable. As a director, you’re responsible for making sure you’ve put in place adequate systems and controls to manage your company data. If you haven’t and there’s an attack, customers, investors and regulators could make a claim against you.
We understand that when you own, run or are a director of a business that there are a lot of things that can play on your mind. While we can’t solve all of your problems we do want to ease your worries when it comes to management liability claims. GMI Insurance Services don’t only offer a comprehensive level of protection but also risk management support and if required claims support.
