If you run your own company, you need to be sure that your business, its management team and employees, are correctly covered. This is why management liability insurance is so important.
Our specialist financial advisors at Rigby Financial, have excellent knowledge in this area. Here they answer some of your most frequently asked questions about management liability and how this particular type of insurance policy could be of benefit to you and your business.
Management liability
There are several aspects to a management liability policy these include:
- Directors and Officers Liability (this a core cover)
- Corporate Legal Liability
- Employment Practice Liability
What is Directors and Officers Liability?
Directors’ and officers’ liability insurance – also known as D&O insurance – covers the cost of compensation claims made against your business’s directors and key managers (officers) for alleged wrongful acts.
Wrongful acts include:
- breach of trust
- breach of duty
- neglect
- error
- misleading statements
- wrongful trading
What D & O covers
Directors’ and officers’ liability covers claims made by:
- regulators, shareholders or investors, e.g. for failure to act in the company’s best interest
- creditors
It also covers claims brought in relation to:
- breach of European legislation
- insolvency
Employment practices liability insurance can be bought as an extension of directors’ and officers’ liability insurance. It covers employee discrimination claims, e.g. for unfair dismissal, harassment, or failure to promote a person.
Directors’ and officers’ liability sometimes covers defence costs arising from criminal and regulatory investigations into your company where no actual wrongful act has been alleged against a director. Contact your insurer to find out what your policy covers.
What D & O does not cover
Directors’ and officers’ liability does not cover claims made against your organisation as a whole, only those made against individuals for alleged wrongful acts carried out in their capacity as directors or officers. Claims made against your organisation would be covered under the corporate liability extension.
Corporate liability
What is corporate liability?
Corporate liability is, essentially, the legal responsibility of a corporation (i.e. a business or company) for criminal activities. It is most commonly used to describe actions, taken by the company itself or its employees, that could be deemed unlawful. However, in some cases, it can also refer to a lack of action – when the action was necessary in order for the company to comply with the law.
A company would be found liable if these actions were:
- performed for the benefit of the company
- a result of negligence
- due to a lack of responsible management
In such circumstances, the company (and its employees) may be prosecuted and punished in a court of law– which is why corporate liability insurance is essential. It will protect you, your business and its finances and, ultimately, could be the difference between your company’s survival or closure.
Why do I need corporate liability insurance?
No matter how careful you are, there’s always a chance that you or your management team could make a mistake. Oversights can easily occur and, in some situations, they can lead to very costly (and stressful!) legal battles.
Corporate liability insurance offers protection against such events. It provides financial security – covering any funds needed to defend yourself and your company in a court of law and ensuring that, in such difficult times, your business stays afloat.
Is corporate liability insurance essential?
Corporate liability insurance isn’t required by law – but it is something you should consider carefully. If a claim was to be made against you or your company, the right policy will take away any financial concerns and could be the difference between your company’s success or failure. You may also find that, without corporate liability insurance, certain clients will be reluctant to go into business with you – in many cases, it’s worth investing in liability insurance for this reason alone.
What does a corporate liability insurance policy cover?
The main purpose of a corporate liability insurance policy is to provide financial protection. Whether you’re facing the consequences of a real or alleged illegal act, the policy will pay for:
- the cost of your defence
- legal fees
- investigation costs (e.g. FCA, HMRC etc.)
- settlement fees
A variety of different claims can be covered by the policy, including everything from workplace injuries and employee grievances to a breach of contract and beyond. These claims may have been made by a business partner, supplier, employee, customer, investor, competitor, or even a shareholder. Essentially, anyone who claims you have committed an illegal or ‘wrongful’ act.
At Rigby Financial, we will tailor the policy to meet the exact needs of your business – giving you peace of mind that, whatever the future holds, your company and its finances are safe.
What is the Corporate Manslaughter and Homicide Act 2007?
The Corporate Manslaughter and Homicide Act 2007 (CM&HA) is a legal act, designed to clarify the corporate liabilities of a company or organisation. Under this act, any director or senior manager that causes a fatality – either due to gross negligence, management failure or a breach of duty of care – can be found guilty in a court of law and prosecuted for corporate manslaughter.
Since the introduction of the CM&HA in 2008, there have been many criminal charges brought against companies for such manslaughter. Therefore, it’s vital that you get the right protection. If you’re part of a senior management team, be sure to prepare for the worst, and invest in management liability insurance that covers claims and investigations under the provisions of CM&HA.
How much corporate liability cover do I need?
Generally speaking, management liability insurance tends to offer a much greater sum than other forms of insurance, paying out £1 – 10 million in the event of a claim. But bear in mind, all organisations are different – and the exact amount of management liability insurance that you need will depend on your company, the nature of its work and its individual requirements.
If you’re unsure about how much management liability coverage is right for you, our team of financial advisors are always on hand to offer advice and guidance. They can help to identify the ideal policy and will ensure that, should the worst happen, you and your company are protected.
How do I find my perfect corporate liability insurance policy?
Whether you’re launching a new business or just looking to renew your existing policy, it’s worth doing a little research. Once you have an idea of the policies available, it’s then worth contacting an independent broker – such as Rigby Financial.
Rigbys is a leading insurance intermediary and one of our main specialisms is commercial insurance. We can assist with all aspects of business and employment protection, including Directors and Officers (D & O), corporate legal liability, employment practice liability insurance and much more. Our team will work closely with you to discuss your business requirements – helping to select the ideal policy for you and giving you peace of mind that you and your business are fully protected.
How much does corporate liability insurance cost?
The exact cost of management liability insurance will vary dependent on the policy, the extent of its cover, and how likely you are to make a claim. Here at Rigby Financial, we tailor the policy to your individual needs and do everything in our power to secure the ideal policy at a competitive price. To find out how much your coverage will cost, simply request a quote using our online form.
Employment practice liability
What is employment practice liability insurance?
Employment practice liability insurance (EPLI) is an extension of D&O insurance. Essentially, it’s bolted onto your existing policy – increasing your level of cover to include employment-related legal action. If a member of staff was to claim their rights have been violated, EPLI will protect your business (and its key managers anddirectors) and cover the cost of any financial repercussions.
What does EPLI cover?
EPLI covers the cost of legal fees, including your defence and legal representation, and any settlements and compensation awards that arise as a result of an employee-related claim. This claim may be due to:
- Unfair dismissal
- Discrimination (e.g. based on age, sex, race, religion etc.)
- Harassment
- Equality in pay
- Deprivation of career opportunities
- Failure to employ or promote a person
- A breach of the employment contract
- Emotional stress caused at work
Is employment practice liability insurance essential?
Legally, you’re not obliged to invest in EPLI for your business – but it’s usually a good idea.
In recent years, new laws and directives – such as the Employment Act 2002 – have been introduced to protect employees. Changes have also been made to the Disability Discrimination Act, the Sex Discrimination Act and the Race Relations Act. Employees are becoming more litigious and the number of employment tribunal cases, and their associated costs, seem to be on the rise.
EPLI is an easy way to stay protected. If an employee was to make a claim, you have the peace of mind all legal costs are covered, and the claim will not affect the future success of your business.
Can I buy EPLI without D&O and/or corporate liability insurance?
EPLI is an add-on and, as such, it can only be bought in conjunction with the core D&O policy. Corporate liability insurance is another optional add-on. This doesn’t necessarily have to be bought with EPLI. However, to achieve the best possible protection for your business, we recommend investing in the full management liability package, including D&O, corporate liability, and employment practice liability.
How much does EPLI cost?
The exact cost of an EPLI policy will depend on a number of factors, including the number of employees, employee turnover rates, and any prior employment-related claims that have been made against the business. Yet rest assured, our team of experts – here at Rigby Financial – will do everything in their power to seek out the best policy for you – and at the best possible price.
Contact Rigby Financial for management liability insurance
If you would like to find out more about management liability and how to protect your company, please feel free to get in touch. We have in-depth knowledge and experience in this area and can help to find the ideal management liability insurance for you. Simply give us a call on 01744 886077 to speak to one of our experts or send an email to enquiries@rigbyfinancial.co.uk. Our offices are open 9am-5.15pm, Monday to Friday, and we will respond to your message as soon as possible.
About the author
