What Is Management Liability Insurance and Who Needs It?

Did you know that when you run a business you may be exposed to unexpected liability costs not covered by commercial general liability insurance?

Commercial liability insurance protects you against claims of bodily injury, personal injury, and property damage, but it offers no protection from lawsuits related to management actions. 

For liabilities not covered by commercial liability, you need management liability insurance. Keep reading to find out what it is, what it covers, how much it costs, and why you may need it. 

What is Management Liability Insurance?

Management liability insurance is a type of insurance that protects business owners and senior executives from a wide range of liabilities not covered by commercial liability insurance. It is a singular policy that typically includes what could be purchased as five standard polices.

These are commercial crime insurance, director and officers (D&O insurance), fiduciary liability insurance, employee practices liability insurance, and professional liability insurance. Depending on your needs, you can even include additional coverages in your management liability insurance plan.

Each of the coverages included in a management liability insurance plan can be bought as a stand-alone policy. But there are two key advantages of buying a singular policy versus buying each of the included coverages on their own. Firstly, you’ll be dealing with one insurance provider. Secondly, you can buy a package build specifically for your business. For example, if you are a financial business, you can purchase a plan created specifically for financial institutions.

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What Does Management Liability Cover?

A management liability insurance policy may include these coverages:

• Directors and Officers Insurance: It protects directors, managers, and other designated employees from legal liabilities resulting from alleged wrong acts. Covered events typically include breach of duty, breach of trust, error, neglect, wrongful trading, and misleading statements. 
• Commercial Crime Insurance: It protects business owners from financial losses following a business-related crime. Covered events usually include forgery, burglary, extortion, fraud, employee dishonesty, and theft, destruction, or damage of money, securities, or other assets. 
• Fiduciary Liability Insurance: Fiduciary liability insurance is a type of errors and omission insurance designed specially for plan sponsors and administrators of pension plans — the fiduciaries — and employee benefit plans. The plan sponsors and administrators of these plans are normally the business owners. The purpose of fiduciary liability insurance is to protect the fiduciaries from financial loss due to claims of breach of duty, mismanagement, or administrative errors and omissions.   
• Employee Practices Liability Insurance: It protects business owners from employee lawsuits. Employee practices liability insurance covers a wide range of employee-related claims, such as wrongful termination, harassment, and discrimination. 
• Professional Liability Insurance: It protects your business against claims of mistakes in professional services, including misrepresentation, inaccurate or incorrect advice, negligence, and violation of good faith.  

How much does Management liability insurance cost?

How much you’ll pay for management liability insurance depends on many factors, including: 

• The nature of your business
• The industry in which your business operate
• The size of your company and its ownership structure
• How many directors, offers, and managers does your business have
• Total number of employees
• Where your business is located
• Your company’s financial standing
• The past claims made against your company
• The coverage limits you opt for

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Who Needs Management Liability Insurance Cover?

All businesses can benefit from having management liability insurance since it reduces their risk by covering legal costs, losses, and damages that may arise from management liability disputes. That said, it is particularly important for businesses operating in heavy-regulated industries, having complex employment practices, overseeing employee benefits plan, or managing financial transactions. 

Here are some of the important facts to keep in mind before you start shopping for a management liability insurance plan: 

• Management liability insurance is highly customizable, so you can buy customized coverage based on your unique needs
• Special package policies are available for privately-held firms, financial institutions, not-for-profit organizations, and small businesses
• While many employees can be included in a management liability insurance plan, it typically covers business owners, corporate officers, directors, managers, and other key employees
• The coverage protects both corporate assets and personal assets of the covered individuals

Conclusion

Management liability insurance protects you and your business against risks not covered by commercial liability insurance. Claims can arise from a wide range of sources such as competitors, regulators, customers, administrators, and shareholders. Without a robust management liability insurance or life insurance plan for business owners and senior management can be exposed to huge financial risks. Speak with a Dundas Life advisor today to find out the coverage that best aligns with your best interests. 

Frequently Asked Questions

What is the difference between management liability insurance and general liability insurance?

General liability insurance covers your business against claims of bodily injury, personal injury, and property damage. Management liability insurance protects your business from lawsuits related to management actions.

Can management liability insurance protect my personal assets as a director or officer?

Yes, it can. Management liability insurance is several coverages rolled into one policy. Typically, it includes Directors and Officers (D&O) insurance, which protects the personal assets of corporate directors from claims arising from decisions and actions taken as part of their duties. Common allegations covered include:

• Misrepresentation of company assets
• Breach of fiduciary duty 
• Failure to comply with regulation
• Creditor claims
• Reporting errors
• Lack of corporate governance

D&O insurance, which is a part of management liability insurance, typically doesn’t cover illegal acts. 

How can I determine the right amount of management liability insurance coverage for my organization?

How much coverage you need depends on factors such as the industry you operate in, the size of your company, the number of employees you have, and the nature of your business. The appropriate coverage amount depends on factors such as the size of your organization, the industry you operate in, and the potential risks and liabilities you face.

An independent insurance advisor can provide you unbiased advice based on your unique circumstances and help you find a plan that suits your requirements and budget.