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Management liability insurance

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Management liability insurance

Management liability insurance protects directors, officers, and the company itself against potential liabilities which might arise from the management activities. Business insurance, including management liability insurance, plays a crucial role in safeguarding businesses from a wide array of risks, ensuring that they are covered against legal costs and damages stemming from disputes.

Why is management liability insurance important?

As a business owner, making management decisions can sometimes lead to financial loss, legal issues, or harm to someone’s reputation. Even with the best intentions, mistakes can happen. Management liability insurance acts as a safety net, ensuring that if things go wrong because of a management decision, the financial burden doesn’t cripple the company or its leaders.

It’s crucial to have cover if your business:

  • Employs several people.

  • Handles significant funds.

  • Operates in regulated sectors.

  • Has multiple stakeholders

  • Has contractual obligations

What does management liability insurance cover?

Each management liability policy differs however here are covers that typically included:

Directors and officers liability

Directors and officers insurance safeguards the leaders of a company, the Directors and Officers, against claims suggesting they acted wrongly. This could mean they did something they shouldn’t have or failed to do something they should have. In this case, the director can be held personally liable and their personal assets put at risk. Directors and officers liability will pay to defend the director. If there is a financial loss resulting from this, the policy can pay up to the policy limit less any costs incurred to defend the director.

Company liability

Company or Corporate liability is a key aspect of management liability insurance, focusing on protection against claims of wrongful acts by the business itself, as opposed to claims against the directors or officers.

Employment Practices Liability

Every employer strives to maintain a safe and fair workplace. But disputes can arise. Employment disputes cover ensures that the company is protected against claims like wrongful dismissal or discrimination.

Crime Cover

Businesses can sometimes suffer financial loss due to dishonest acts by employees or outsiders. This cover offers a safety net.

Tax Audit Cover

The Inland Revenue Department may decide to audit a company. This cover helps in managing the costs associated with such audits.

Fiduciary Liability

Protects individuals acting as fiduciaries on behalf of a benefit plan against claims of mismanagement of the plan’s assets.

Occupational Health & Safety Defence Costs

Legal representation is essential when facing investigations from WorkSafe. This cover ensures companies don’t face these costs alone.

Kidnap and Ransom

Offers protection for individuals and corporations against financial losses due to kidnapping, ransom, and extortion demands.

Statutory Liability

Provides insurance cover against fines, penalties, and legal representation for legislative breaches, including investigations and prosecutions by WorkSafe.

How much does management liability insurance cost in NZ?

Management liability insurance premiums are calculated on several different factors including:

  • Size of company
  • Types of security
  • Industry operating in
  • Claims history

Management liability insurance in NZ typically costs between $50 to $100 per month.

Who needs management liability insurance?

Businesses operating in most industries, regardless of size, can benefit. However, it’s particularly vital for companies with significant assets, those in industries with higher risks, or any company wishing to protect its leaders and financial health from potential legal liability. Small business is lower in risk however there are still covers in this packaged policy that are relevant. Tailored insurance solutions are essential in providing protection and comfort for company leaders, by covering the unique risks and advising on the best policies to manage financial and legal burdens effectively.

No. While both provide protection against claims, management liability focuses on the decisions made by leaders. Professional indemnity covers the insured for claims against professional advice or services.

Not always. It covers defense costs, settlements, or judgments up to the policy’s limit. It’s crucial to understand the specifics of your policy.

How do I get proof of management liability insurance?

You can usually get proof of insurance same day when you purchase business management liability through Gerrards.

Acquiring management liability cover from traditional insurance brokers may require a few weeks, a delay that could create problems for policyholders who need instant insurance proof of management liability for a contract. 

To obtain insurance coverage promptly, contact us. We may require you to provide some fundamental details about your business, such as:

  • The name of your business

  • Company structure 

  • Turnover

  • Financial statements 

  • Risk management strategies

Once you accept a quote we will issue you with a certificate of management liability insurance. 

What does management liability insurance not cover?

Intentional Illegal Acts

If a leader intentionally breaks the law, this isn’t covered.

Prior Known Claims

If you knew about a claim before the policy started, it’s generally excluded.

Bodily Injury & Property Damage

Financial loss resulting from bodily injury or property damage are typically covered under general liability policies.

Contractual Liabilities

Liabilities assumed solely due to a contract might be excluded.

Claims from Specific Entities

Some policies exclude claims made by specific entities, such as major shareholders of private companies.

Other common questions about management liability insurance NZ

Yes, insurers offer different policies limits and covers under in a package depending on the business and your personal preferences. For example Dual Insurance has gold and platinum tiers of cover.  

No, coverage usually begins from the policy’s start date unless specified otherwise.

Regularly review your policy. If there are significant changes, your coverage and premiums might need adjustments.

Management liability often focuses on company leaders. However, some aspects, like crime coverage or employment practices liability, may pertain to all employees.

Yes, in most cases policies can be cancelled by the business for a refund of the remaining premium for the year. Do note that if a policy is cancelled, you won’t have any cover for business activities while the policy was in place. For example if an employee was let go whilst the policy was in place and they decide to bring legal action after you have cancelled the policy, the policy would not pay the expenses to defend you as the coverage is not applicable anymore.

When considering management liability insurance, it’s important to understand how it differs from professional indemnity insurance. While management liability insurance is designed to protect against the risks associated with the running of a business, professional indemnity insurance specifically covers the professional activities and advice/services provided to customers. This distinction is crucial for businesses that offer professional services, as it ensures comprehensive coverage across different aspects of business operations.

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