What is management liability insurance?

Traditionally known as directors and officers insurance, management liability insurance (MLI) protects senior individuals against claims brought against them in court or at an employment tribunal, such as wrongful trading, tax regulation breaches, sexual harassment and corporate manslaughter.

What is the difference between professional indemnity and management liability insurance?

Professional indemnity insurance protects against claims of negligence related to advice or services provided, while MLI provides protection to businesses and their directors/senior management against claims that arise from the decisions they make whilst managing the company.

Is management liability the same as employers’ liability?

No, they are not the same. Employers’ liability covers damages and costs for accidents, injuries, or illnesses that occur in the workplace, whereas management liability protects key individuals (e.g. directors, officers, and other management), as well as the business itself as a legal entity.

How can management liability insurance protect me?

A MLI policy covers two key aspects: claims against a director, and claims against your company. In the event of a claim, MLI would cover defence costs plus any settlement or compensation. 

Depending on the policy, cover can also extend across:

  • Cyber risks – first-party losses such as cyber extortion and fraud, plus third-party losses such as privacy breaches.
  • Criminal activity – losses arising from employee theft of assets belonging to you or your clients. 
  • Fidelity liability – losses due to dishonest employees or contractors.
  • Business crisis containment – crisis management costs.
  • Statutory and tax audit liability – penalties for regulatory breaches and the costs of tax audits.

What should I consider when it comes to management liability cover?

The first step in mitigating business risks is to understand what they are. A one-size-fits-all approach to MLI will not work and could end up costing you more time and money than having no cover at all. Working with a specialised insurance broker will help to tailor a policy to your specific needs. 

Every insurance product comes with exclusions so you must also be aware of the events that you aren’t covered for. Things like anti-competitive behaviour, product liability, pollution, and wilful breaches of duty are common exclusions on MLI policies, for example. Plus, you may want to consider retroactive cover that offers coverage for claims arising from incidents that occurred before the policy start date. 

As your business evolves, so do its risks, and your liability management needs. Do not set and forget. Regularly reviewing your cover will not only ensure you maintain the appropriate amount of cover, but may also allow you to access a more competitive offering.