Management Liability Insurance

Running a company creates exposure beyond its products sold or services provided. Directors and officers can be held personally liable for decisions made as part of their role, they can face alleged or actual failures of their fiduciary duties, the company can be confronted with employment disputes, regulatory investigations and statutory penalties can arise, and money can be embezzled from inside the company. The corporate structure does not insulate the individual directors. Management liability insurance is designed to respond to this cluster of risks for privately held companies, subject to policy wording.

Management liability insurance is a packaged cover for private, limited liability companies. It may include directors’ and officers’ liability, company reimbursement, corporate entity liability, employment practices liability, statutory liability (defence costs and penalties where insurable at law), crime or fidelity cover, subject to policy wording. Boardroom liability, the personal exposure of directors and officers, is a central strand of this conversation but not the only one.

Why it matters

Directors’ duties are personal. Penalties and disqualification proceedings attach to the person, not the company, and personal assets are at risk. The company structure most owners rely on does not insulate the directors from a claim. Boardroom drama is not where most private company claims arise, insurers are seeing large claim volumes of employment disputes.

A major trap often missed is the risk of insolvency. The moment directors most need cover is the moment insurers are most cautious. Insolvency-related exclusions and continuity need to be discussed before distress, not after. An experienced liability broker will identify this as a key risk and guide their client on the appropriate management of this risk and related cover.

Management liability is not a substitute for other covers: it does not respond when your professional service fails a client (that is professional indemnity) and it does not respond to injuring someone or damaging property (that is public liability). Crossover between policies can follow from complex claims and clients need to be guided on the correct timing of notifications to insurers under their broader insurance program.

What are the benefits?

• Cover designed to respond to the personal exposure of directors and officers, including defence costs, subject to the policy wording.
• Employment practices liability for the disputes that drive a large proportion of claims.
• Statutory liability cover for defence costs and penalties, but only where penalties are insurable at law. An experienced liability broker can guide you through the excluded penalties and exposures that are uninsurable.
• Crime or fidelity cover for theft, coordinated with the cyber policy on social engineering for the inevitable gap and overlap between the two is closed deliberately.
• A structured review of the corporate structure, who are the insureds: past directors, incoming directors, shadow officers, subsidiaries, joint ventures, related entities and the expectations around cover should be checked rather than assumed.
• Continuity and run-off planning: claims-made discipline managed at every renewal, and former directors protected after a sale or wind-up rather than left exposed to prior acts. An experienced liability broker can guide you through the sale or winding up process and the exposures created by contractual arrangements.

What can it cover?

A management liability package may include, subject to policy wording:

• Directors’ and officers’ liability: the personal exposure of directors and officers for decisions made in the role, including defence costs.
• Company reimbursement: where the company indemnifies its directors and seeks reimbursement under the policy.
• Corporate entity liability: cover for the company itself for certain management-related claims.
• Employment practices liability: claims such as unfair dismissal, discrimination and other employment disputes, typically with its own retention and conditions.
• Statutory liability: defence costs for regulatory investigations and penalties where insurable at law.
• Crime/fidelity: theft of money or property by employees or third parties, with proof and discovery mechanics that differ from other sections.

Larger corporates generally move beyond the package to standalone D&O with separate employment practices and crime placements. Listed entities require bespoke and standalone cover placed by an experienced liability broker well versed in the risks and regulatory exposures of a listed entity. DKG advises at all these altitudes.

What usually isn’t covered?

Exclusions and limitations vary between wordings, but commonly include, subject to policy wording:

• Fraud and dishonesty, typically excluded once established, with defence costs treatment varying between wordings.
• Claims and circumstances known before the policy started.
• Insolvency-related exclusions or restrictions in some wordings where not skilfully identified and negotiated out by a broker venturing outside of their skillset.
• Claims by major shareholders and insured-versus-insured limitations, these should be closely reviewed and negotiated by your liability broker and explained to the company and its board.
• Penalties that are uninsurable at law; certain statutory regimes carve out cover entirely.
• Bodily injury and property damage, which belong to liability policies, and professional services failures, which belong to professional indemnity.
• Employment entitlements such as unpaid wages or redundancy owed, as distinct from employment practices claims.

How DKG supports you

DKG starts with a discovery meeting, reviewing your corporate structure and the people as the intended insureds under this policy. We review your corporate structure including entities, ownership and any major shareholders, subsidiaries, related entities, joint ventures and overseas exposure, financial position (insurers underwrite to solvency), headcount and HR maturity including policies, contracts and prior disputes, the regulatory environment you operate in and your claims and circumstances history, together with the existing policy’s retroactive date and terms. These are stress tested against your risk appetite and risk management processes in place.

We then design the appropriate cover, negotiate terms and once reviewed with you place the cover: a package management liability or standalone D&O chosen on size, complexity and external capital; limits set with defence costs erosion and allocation between company and directors in view; retentions per section examined, employment practices claims conditions and insurers’ requirements; all entities and all past, present and future directors and officers captured deliberately; and the crime section’s boundary/overlap with your cyber cover with respect to social engineering with the appropriate overlap/gap covered. Where ownership structure interacts with major shareholder provisions, we negotiate the wording rather than accept it and advise you on the options at your disposal to address this risk.

Claims-made discipline is the standing work. The policy responds to claims first made and notified during the period, retroactive dates limit how far back covered conduct reaches, and circumstances such as a regulator’s initial letter or an escalating employee grievance should be notified when known, not when they mature. We manage continuity at every renewal, handle known circumstances before any insurer change and plan with you the run-off around a sale, restructure or retirement so former directors are not left exposed. At claim time we help prepare and present the matter and advocate through to resolution, with the insurer and the wording determining the outcome.

To review directors’ personal exposure, employment practices risk and statutory liability cover, contact Carien Ahdar via email or phone on 1800 252 926.

Related services

• Professional Indemnity Insurance
• Financial and Professional Liability Insurance
• Cyber Insurance
• Public and Product Liability Insurance
• Workers Compensation

Other cover may be considered and additional exclusions may apply.

At DKG Insurance Brokers, we understand that the needs of each client are different, therefore we will take the time to assess your individual risk requirements and deliver a bespoke solution. Please reach out to one of our experienced brokers today.

Important note: The information provided is general advice only and has been prepared without taking into account your objectives, financial situation or needs. When making decisions about management liability insurance, please consider the Product Disclosure Statement.