Does My Business Need Management Liability?
Whether you are a public company or a private corporation, management liability is an important policy to have in place as part of your overall insurance program.
So, what constitutes management liability?
This is a policy which protects an entity, “the company”, its directors and its officers, its shareholders, if publicly held, and its assets from a variety of claims. The company is protected against claims alleging mismanagement and the directors and officers are protected against claims resulting from decisions they make. More importantly, the assets of the company as well as the board members, personally, are protected in cases of civil suits brought about by potential litigants.
Another component of Management Liability is Fiduciary liability which protects against claims alleging mismanagement of employee benefit plans.
Other inclusions which are often found in management policies include employment practices liability. This covers suits brought about by employees, independent contractors and/or third parties alleging wrongful acts, such as discrimination, mental anguish, harassment, and an assortment of workplace difficulties which can, in some cases, even include “bullying.”
Most important, however, is the defense provided by such policies, since we all know that even if allegations are proven to be false or fraudulent, the cost of defense can impact heavily upon a company’s bottom line. Some carriers include defense costs within the limits of liability and some provide for defense costs outside the limit. Given the choice, you would probably want to opt for the latter.
Deductibles can range from $5,000 to $50,000 and the higher the deductible, the less costly the policy.
If you have any doubt about the necessity of having such coverage in place, just take a look at some of the claims resulting from lay-offs, unlawful termination, sexual harassment, whistle-blowing, etc.
When asked to join a Board of Directors, the first question you should ask is what type of insurance does the company have in place to protect your interests? You are sure to be glad you did should a claim be brought during your tenure on the board.
– Karen Skoler, CPCU
