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Management liability insurance can protect the directors and officers of a business, and the insured business itself from some financial risks relating to the management of a company. Many medical practices, dental practices and vet practices consider this category of insurance to protect them from such risks. It can be a tricky category of insurance to understand.

Some insurers will offer Management Liability Insurance on its own and others will require it to be purchased as part of a broader Business Insurance policy that also covers the property of the business.

Some people may confuse a Management Liability Insurance policy with a Professional Indemnity Insurance policy. Management liability insurance helps cover the management of a business, whereas professional indemnity insurance helps cover the services and advice offered by a business and its employees.

There can sometimes also be confusion with Public liability Insurance. This category protects a business from the financial cost of third party injury and property damage claims only (and not matters to do with employees or employment practices).

Some people get confused between what is referred to as “Association Liability Insurance” and “Management Liability Insurance”. Association liability insurance is designed to cover not-for-profit and charitable associations while a management liability policy provides cover for private companies. An association liability policy may also include professional indemnity cover but a management liability policy will usually not.

The details of what will be covered by a policy of insurance can be found in the Product Disclosure Statement or PDS issued by the insurer. This must be read before taking out the cover. Each PDS will be different and this is true for Management Liability insurance. Some insurers will cover less than others for certain aspects of the policy.

A Management Liability Policy usually provides coverage for allegations or actual wrongdoing of mismanagement, misconduct or legislative breaches against directors, officers and senior managers in matters relating to the running of the business. Examples of some features that may be offered include :

1. Directors and Officers Liability which protects directors and officers from claims of actual or alleged wrongful acts in their role as a director or officer.
2. Corporate (company) Liability which protects your company against claims of alleged or actual wrongful acts by it (as opposed to claims being made against the directors or officers).
3. Employment Practices Liability which covers the company for claims related to a breach of employment practices laws, such as wrongful dismissal, discrimination, bullying or harassment.
4. Statutory Liability which provides cover for fines, penalties and legal representation to defend against allegations of some legislative breaches, for example, investigations and prosecutions by WorkSafe.
5. Tax Audit cover which covers the costs associated with a tax audit by the ATO, such as accountancy fees.
6. Crime Protection/Fidelity which covers the company for direct financial loss caused by a dishonest or fraudulent act committed by employees or third parties. Some elements of Cyber Crime, such as loss of electronic data, may be excluded and coverages from a separate Cyber Insurance policy may be needed.

Examples of what may not be covered :

1. Claims brought by any person or entity holding beneficially or otherwise or in control of more than a stated larger share of the business
2. Accidental injury and property damage to third parties (where a Public Liability policy may give cover)
3. Breaches of professional duty in relation to professional services or advice provided (where A Professional Indemnity Insurance policy may give cover)
4. Intentional acts by an insured
5. Claims relating to restrictive trade practices
6. Payroll related liabilities
7. Claims arising from insolvency

This is general information that does not take into account your specific needs, goals and circumstances. If you would like a review of your business insurance please don’t hesitate to contact us at any time.

Whether you are based in WA, NSW, VIC, TAS or anywhere else in Australia, and whether you are run a medical practice, dental practice or vet practice, to find out more, contact us for a no obligation review at any time.