Avoiding ML hell

Management liability policies can differ widely between insurers. Why limits, sublimits, exclusions and the definition of who is insured are worth checking as a business changes.

While it may not be as obvious a requirement as property cover, small business owners may wish to pay close attention to management liability insurance.

Why management liability matters

It is one of the covers that relates to the way a company is run and managed, and to the exposures that can follow decisions made by its directors and officers.

Management liability policies commonly bring together several covers relating to exposures faced by directors, officers, employees and the company itself, subject to the particular policy wording. For a fuller explanation of how the sections fit together, see management liability insurance in Australia.

What a management liability policy may include

A policy commonly includes sections such as directors and officers liability, employment practices liability, statutory liability and crime cover, although not every policy contains every section. For small businesses, where owners are often directly involved in day-to-day management, these exposures can be concentrated in a small number of people.

Claims and investigations in this area can become complex, which is one reason the structure of the cover is worth understanding before an issue arises.

Employment and regulatory exposures

“Management liability is not a set-and-forget policy. The wording, limits and insured persons should be reviewed as the business changes.”

Employment-related disputes, such as unfair dismissal, discrimination or workplace harassment, can arise even in well-run businesses. AI tools are also making it easier for employees to prepare and lodge employment-related complaints, a trend covered in AI and unfair dismissal claims.

Similarly, breaches of regulations or reporting obligations can trigger investigations and penalties from regulators. Defending these matters can be costly, time-consuming and stressful, and how a policy responds depends on the sections held and the wording.

Limits, sublimits and exclusions

The consequences of getting it wrong can be significant. One of the issues to watch is whether limits are adequate and whether there are gaps between the sections held. Not all management liability policies are the same, and limits, sublimits, exclusions and definitions can vary widely between insurers.

If a policy limit is set too low, it may be reduced or exhausted by legal costs, depending on how defence costs are treated under the wording, which can leave a business exposed to the remaining expenses. Likewise, where sections such as employment practices liability are missing or restricted, some of the more common claims faced by small businesses may not be covered.

Who is insured

Another consideration is who is insured. Where a policy is poorly structured, the definitions may not extend to all directors, officers or the entity itself, and that is worth checking against the wording rather than assumed.

That can matter for small company owners, who may not realise that the way a policy defines insured persons does not always align with the way the business is structured or managed.

Why the policy should be reviewed as the business changes

There is also the risk of a policy not keeping pace as a business evolves. Changes in staff numbers, operations or regulatory requirements can all affect exposure. Where cover is not reviewed regularly, it may no longer reflect the current risk profile. A broker can explain how the sections fit together and, if a matter arises, assist with the claims process.

If your business has directors, employees or changing management exposures, contact the RMA Insurance Brokers team to review how your current management liability arrangements are structured and whether the limits, sections and insured persons still reflect the way the business operates.

Source: NIBA Winter Newsletter 2026