Management liability insurance needs to be read section by section. Review who is insured, which management risks are included and when a claim or circumstance must be reported.
Management decisions create different exposures
Running a company involves decisions about people, money, governance and regulatory obligations. A dispute about a director’s conduct or an employment decision can be different from a customer allegation about professional advice.
Management liability and professional indemnity are therefore not interchangeable. The appropriate policy depends on the allegation, the insured parties and the wording. Insurance also does not replace the duties of directors or the need for sound governance.
Check the sections actually selected
A management liability package may include directors’ and officers’ liability, corporate liability, employment practices liability or crime cover. Optional sections, insured persons and definitions vary. A list in a brochure is not proof that every section is included in your schedule.
Review the limits and excesses for each section, whether defence costs reduce the available limit, and how related claims are treated. Ask specifically about subsidiaries, newly acquired entities and former directors if they are relevant to the business.
Do not assume every fine or investigation is covered
Regulatory matters need careful attention. Some policies may cover specified investigation or defence costs, but conditions and exclusions apply. Fines and penalties are not universally insurable, and a policy cannot make a legally prohibited indemnity available.
Other important issues can include deliberate wrongdoing, prior known matters, contractual liability and professional services exclusions. Read the relevant section and general exclusions together rather than relying on a single summary paragraph.
Understand claims-made and notification requirements
Many liability sections operate on a claims-made basis. The timing of a claim, knowledge of circumstances and notification to the insurer can be critical. Crime sections may use a different discovery trigger, so do not apply one rule to the whole package.
Check retroactive dates, continuity provisions and any extended reporting arrangements before changing insurers or allowing cover to lapse. These do not automatically protect all past acts or known disputes. Notify potential matters promptly and obtain advice rather than waiting for the next renewal.
Combine insurance with everyday controls
Keep clear board decisions, accurate financial records, documented employment processes and controls over payments and access. Allocate responsibility for identifying and escalating complaints or demands.
At renewal, explain acquisitions, changes in activities, staffing and ownership, and known disputes accurately. Your broker can help clarify insurance questions; legal and accounting advisers remain important for the underlying obligations and decisions.
Further reading
- ASIC — Obligations of company officeholders
- QBE Australia — Professional and management liability
- QBE Australia — Management Liability wording, September 2023 example (not your policy)
This is an updated edition of earlier newsletter material.
General information only; it does not consider your objectives, financial situation or needs. Cover depends on the policy wording, schedule, limits, exclusions and circumstances. Read the relevant policy documents and seek advice appropriate to your situation. No claim outcome is guaranteed.
