Why Might You Need Management Liability Insurance?

“The buck stops with you”. That’s long been a mantra regarding decision-making in the business world.  The problem for many directors, managers and business owners is that this same mantra is now increasingly being applied within legal contexts.  This can catapult them towards legal action and all the associated eye-watering costs of defending a case.

The legal process is now far keener to make directors, officers and senior managers personally responsible for things that go wrong, rather than allowing them to hide behind a corporate entity.

What is the point of management liability insurance?

The list of possible digressions is extensive.  A health or safety breach could result in death or serious injury to an employee. A toxic spillage could damage the local environment and contaminate public water supplies.  An action, or element of inaction, might cause the share price to plummet.  A decision not to purchase cyber insurance may see the business facing major losses due to a data breach and downtime, to the displeasure of investors. Then there is always the possibility of an employee action and tribunal case.

Whatever it is, can be a major issue for the director that should have addressed the scenario or ensured there were no holes in risk exposures.  If there is any form of inaction or negligence, it can lead to prosecution under a variety of laws or as a result of regulator action.  With so many regulators in the UK, this is an ever-present threat.

Who needs management liability insurance?

Management liability insurance is something highly appropriate for smaller and medium-sized enterprises, landlords, care providers, tech or professional service firms, or charities and non-profits that need to protect against such actions, containing, as it does, Directors & Officers cover.

Being deemed to be personally liable for a situation has major financial implications.  It places an individual’s personal assets at risk of having to be liquidated, to pay a major fine or settlement figure to a disadvantaged third party. There is also the possibility of imprisonment, if mitigating circumstances cannot be presented in a compelling legal defence.

How is management liability insurance different from D&O insurance?

A management liability insurance policy differs from D&O cover in that it goes further. It also provides cover for a range of everyday business issues and actions, which could arise.  Some of these fall under employment practice and breaches of employment law, whilst others are actions that could result from company actions, whether that is a tax issue, copyright infringement, environmental mistake or contractual dispute.

The policy gives the insured professional legal advice, representation and potentially the payment of a settlement to a third party, if a case goes in that party’s favour.

It also delivers pro-active legal advice and assistance in avoiding legal issues and regulatory action, by handling things correctly from the word go, or before they escalate.  With the provision of risk management tools and resources, regulatory updates and legal advice lines, there is assistance on-hand, whenever required.  If necessary, there is also crisis PR support available with many of these policies.

The benefits of management liability insurance

Having professional legal representation and mounting a defence can hit profits and pockets hard.  Even if there is no real case to answer, the financial cost of proving that can be ruinous.

In an age in which there is increased awareness of employment rights, stronger regulatory enforcement from bodies such as the Health and Safety Executive (HSE), the Financial Conduct Authority (FCA) and the Information Commissioner’s Office (ICO), and an ever-present cyber-crime threat, one insurance cover that is now an essential, rather than a nice-to, is management liability insurance.

The cover is not just about protecting the assets of a director but building greater resilience to ensure business continuity in the event of a legal or compliance  issue. It can be a valuable pathway towards stronger corporate governance, which can have an added benefit, of opening up new opportunities with those clients wanting to work with well-run businesses.  This can also be a major influencer for lenders and investors, who only wish to put their financial faith in businesses with low levels of financial instability.

How to buy management liability insurance

The cost of this essential protection is surprisingly affordable – often less than the cost of a tech contract for a gadget per month.  It allows a business to be on the front foot, should an issue arise, and be prepared for the worst.

Nevertheless, this is a much-overlooked type of cover and you may yourself have pushed thoughts about purchasing this insurance to one side.  Put this right today, to safeguard your career, your reputation and your relationships with suppliers, contractors, customers and investors.  It can be the difference between a fragile financial future and personal distress, and a pathway that can allow you to confidently grow and explore new strategies for growth and profitability, whilst having the peace of mind that your personal income, property and possessions are protected.

Call us on 0113 244 8686 today, to talk through your needs, or choose a Gauntlet local broker from the map here.

Photo by Daniela Holzer on Unsplash