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Management liability insurance

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Frequently asked questions about management liability insurance

Management liability insurance is one of the most common insurance policies for businesses. As with anything popular, many questions arise regarding its specifics, and here are the most frequently asked ones.

Management Liability Insurance Requirements and Coverages

What Does Management Liability Insurance Cover?

Management liability insurance protects companies, specifically their management team, against the risks and exposures of running the business. This includes cover for claims of wrongdoing connected to their managerial responsibilities. These might range from employment disputes to breach of duty and more.

Is There a Legal Requirement for Management Liability Insurance?

No, there isn’t a legal requirement in New Zealand to have this insurance. However, given the potential risks managers and directors face in their roles, it’s often considered essential protection.

What are the Common Exclusions in Management Liability Policies?

Every policy is unique, but common exclusions might include claims arising from known prior acts, intentional illegal acts, or claims related to insolvency when it’s caused by reckless trading.

Can I Customize My Management Liability Policy?

Yes, most insurers, including those we liaise with at Gerrards, offer flexibility in terms of policy add-ons or exclusions to fit a business’s unique needs and industry risks.

Management liability insurance

What’s Unique About Management Liability Insurance in New Zealand?

In NZ, local laws and business practices create a specific set of challenges for managers and directors. For instance, NZ’s health and safety regulations are strict, and there’s increased scrutiny on directors’ responsibilities, making the local version of this insurance vital.

Does Every Business in NZ Need Management Liability Insurance?

Not every business, but given the potential legal costs and compensation claims directors could face, it’s a recommended protective measure for most businesses, big or small.

Is management liability expensive in New Zealand?

The cost of management liability insurance is typically $50 – $100 per month. The cost varies depending on various factors like business size, turnover, and industry. While some may consider it an added cost, the financial protection it offers often outweighs the premium expense.

 

How to Buy Management Liability Insurance with Gerrards

How Long Does it Take to Buy Management Liability Through Gerrards?

In 24 hours or less, we can provide multiple quotes from top insurers. Our team can also advise on coverage limits and the best fit for your business. Once everything’s settled, we’ll promptly send over your certificate.

What is a Management Liability Insurance Certificate?

It’s a document that verifies your coverage. This certificate can be shown to stakeholders, clients, or regulatory bodies as proof of your insurance protection.

What Industries Can Gerrards Offer Coverage For?

Any industry. While each industry has its own risks, we work with a range of insurers to ensure coverage tailored to your specific needs.

How Much Management Liability Do I Need?

This varies for every business. Talk to us, provide some details, and we’ll guide you on the ideal amount of coverage.

Management liability claims

How Do I Make a Claim?

Contact us, and we’ll handle the heavy lifting. We’ll communicate with the insurance company for you and advocate on your behalf, ensuring you get the best possible outcome.

What Are Some Common Management Liability Claims?

In a medium-sized tech startup in Auckland, Jane, a company director, failed to conduct appropriate due diligence when signing off on a major supplier contract. The oversight led to substantial financial losses as the supplier couldn’t deliver as promised. Shareholders lodged a claim against Jane for not upholding her fiduciary responsibilities.

Tom, the Operations Manager of a well-known Wellington hotel, was reported to have terminated an employee based on discriminatory grounds. The employee, believing her termination was due to her recent pregnancy announcement, sought legal recourse. The situation led to an employment dispute claim against the hotel management for wrongful termination and discrimination.

A software company in Christchurch, was on the verge of securing significant investments. The company’s CFO, Mike, provided potential investors with financial statements that painted an overly rosy picture of the company’s health. When the discrepancies in the reports were discovered, the investors faced major losses and filed a claim against Mike for misrepresentation.

A manufacturing company in Dunedin, prided itself on its green initiatives. However, during a routine inspection, it was found that the company’s director, Lucas, had overlooked a critical environmental regulation. This oversight resulted in the discharge of untreated waste into local water sources. The regulatory body imposed hefty fines on the company, and stakeholders filed a claim against Lucas for his negligence.

Is management liability insurance worth is?

When considering management liability insurance, weighing the benefits against the drawbacks is crucial. Here’s a straightforward pros and cons list to help you decide:

Management liability pros:

  1. Financial Protection: Shields company directors and officers from potential high-cost legal actions that could otherwise cripple personal finances or the business’s reserves.

  2. Peace of Mind: Directors and managers can perform their duties with confidence, knowing they are covered against unforeseen mishaps or honest mistakes.

  3. Attract Talent: Having such insurance in place can make the company more appealing to potential high-calibre managerial talent who understand the risks associated with their roles.

  4. Stakeholder Trust: Investors and stakeholders may have greater trust in a company that has protections in place, ensuring that potential legal claims won’t drastically affect business operations or returns on investment.

  5. Risk Management: With insurance in place, there may be a stronger emphasis on identifying and managing risks early, reducing the likelihood of substantial claims.

Management liability cons: 

  1. Initial Costs: Especially for smaller businesses or startups, the initial premium costs might be perceived as a significant expense.

  2. Over-reliance: Companies might develop a false sense of security, assuming the insurance will cover all mistakes, potentially leading to laxity in decision-making or oversight.

  3. Policy Limitations: All insurance policies have limits and exclusions. There might be cases where a particular claim is not covered, or the coverage might not be sufficient for the claim’s entirety.

  4. Potential for Increased Scrutiny: In the event of a claim, there might be detailed investigations into the company’s operations and the actions of its management, which can be time-consuming and stressful.

  5. Premium Fluctuations: If claims are made, future premiums might rise, increasing the ongoing cost of coverage for the business.

Management liability insurance policy changes

What Happens If I Need to Change My Insurance Later?

Changes in business size, operations, or risks might necessitate a policy update. Just get in touch, and we’ll help adjust your coverage.

What if I Cancel My Policy?

If you cancel, you expose your business to potential risks. Without coverage, any claim or legal action would be out-of-pocket, potentially jeopardizing your business’s finances.

How does management liability insurance compare with other policies? 

Management Liability Insurance This covers a wide range of issues, from employment practices and fiduciary duties to crime cover. Think of it as a package that has different protections all wrapped up together.

Directors and Officers Insurance This specifically protects the top people in the company, like the CEO or other officers, from personal losses if they get sued for decisions they made in their job. You can buy this on its own, but it’s often part of the bigger package mentioned above.

Management Liability Insurance

Again, it’s a package that covers many areas. This means it can help pay for issues beyond just employment problems.

Employment Disputes

This focuses on issues between workers and the company, like if someone feels they were unfairly fired or treated badly. It’s a more specific kind of protection. You can buy this by itself, but many times it’s also included in the bigger package.

Management Liability Insurance

It’s a broad coverage that helps protect against many problems a company might face, not just mistakes they made in their work.

Professional Indemnity

This one’s all about mistakes. If a company or person messes up in their professional services and a client loses money because of it, this insurance helps cover the costs. It’s for when professionals make errors or forget something important in their job.

Do you have further questions about management liability insurance NZ?

We hope this guide has shed light on the intricacies of management liability insurance in New Zealand. However, we understand that every business is unique, and you might still have questions specific to your situation. At Gerrards Insurance Brokers, we’re here to help. If you have any further queries about management liability, or any other insurance need, please don’t hesitate to contact us. Our team of experienced professionals is always ready to provide personalised advice and solutions tailored to your business. 

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