Management liability insurance for Australian businesses
Running a business can expose directors, managers and the company itself to claims arising from decisions, employment matters and regulatory obligations. RMA Insurance Brokers helps businesses review and arrange management liability insurance around those exposures.
Management liability insurance at a glance
Management liability insurance is designed to address certain claims and investigations arising from the way a business is directed, managed and administered.
Depending on the policy, it can provide protection for directors and officers, the company itself and certain employment, statutory and crime-related exposures.
Key areas
- Directors & officers
- Company liability
- Employment practices
- Statutory liability
- Crime & employee dishonesty
- Defence & investigation costs
Who should consider management liability insurance?
Management liability is particularly relevant to privately owned businesses where people are making decisions on behalf of a company.
- Private companies
- Family businesses
- Farming and agribusiness companies
- Regional businesses
- Businesses employing staff
- Incorporated professional and service businesses
The exposure is not determined only by company size. A smaller company can still face an employment dispute, regulator investigation, alleged breach of directors’ duties, employee fraud or a claim against the business or one of its directors.
For incorporated farming businesses, professional firms and rma network Livestock & Property Agents, management liability can sit alongside other business, liability and professional insurance rather than replace those covers.
For a broader explanation of the cover, see our guide to management liability insurance in Australia.
What can management liability insurance cover?
Directors & officers liability
Cover may respond to certain claims made against directors, officers or managers alleging wrongful acts carried out in their management capacity.
Depending on the policy, allegations may include breach of duty, mismanagement or misleading conduct.
Corporate liability
Depending on the wording, management liability may also provide cover for certain claims made against the company itself.
This can include eligible defence and settlement costs arising from allegations of wrongful conduct by the organisation.
Corporate liability is distinct from the protection provided directly to individual directors and officers.
Employment practices liability
Employment practices liability may respond to certain claims involving the employment relationship.
Depending on the policy, this can include allegations such as unfair or wrongful dismissal, discrimination, bullying, harassment or other covered employment practices matters.
Statutory liability & investigations
Depending on the policy, statutory liability cover may help with certain investigation and defence costs arising from alleged breaches of legislation.
Some policies may also provide cover for fines or penalties where they are legally insurable.
Not all fines or penalties can legally be insured, and the position can vary by legislation and jurisdiction. Defence and investigation costs may also be treated differently.
Crime & employee dishonesty
Some management liability policies contain a crime or fidelity section.
Depending on the wording, this may respond to certain direct financial losses resulting from dishonest or fraudulent conduct by employees and, under some policies, specified external fraud events.
Defence & inquiry costs
A management claim or regulatory matter can generate significant legal and professional costs before liability has been determined.
Depending on the wording, cover may include eligible defence costs and representation costs associated with certain government or regulatory inquiries.
The underlying matter generally needs to fall within an insured section of the policy.
Our article on AI and unfair dismissal claims looks at why employment disputes are becoming easier to prepare and lodge, and why documented employment processes remain important.
Management liability is a package of different covers
Management liability is not one single type of liability cover.
Most policies combine several sections addressing different exposures faced by directors and officers, the company, employees, the business in its capacity as an employer and the business when dealing with regulators.
Not every insurer structures these sections in the same way. Limits may be shared across the policy or allocated by section. Some areas may have lower sub-limits, separate excesses or specific exclusions.
Defence costs may also reduce the amount remaining under the policy limit, depending on the wording.
This means two management liability policies with the same headline limit can provide materially different protection.
Our article management liability gaps to watch explains why limits, sub-limits, exclusions and the definition of who is insured should be reviewed rather than assumed.
Claims-made cover and continuity matter
Like professional indemnity, management liability is commonly written on a claims-made basis.
In broad terms, the policy that may need to respond is generally the policy in force when a claim is first made or a relevant circumstance is notified, subject to the wording.
This makes continuity important, particularly where:
- a policy is allowed to lapse
- the insurer changes and the retroactive position is not maintained
- a known circumstance is not notified before renewal
- a company is sold
- directors change
- a business stops trading
Where ownership changes or a company ceases trading, run-off cover may need to be considered for historical management exposures.
Our guide to run-off cover when buying or selling a business explains how claims-made policies can continue to matter after ownership changes.
How management liability differs from professional indemnity and public liability
The policies can all involve allegations against a business, but the allegation is different.
Management liability generally concerns the way the company is run or managed, including directors’ conduct, employment matters and certain statutory exposures.
Professional indemnity insurance generally concerns professional advice, services, errors or omissions that allegedly cause a client financial loss.
Public and products liability insurance generally concerns third-party personal injury or property damage arising from business activities or products.
A business may need more than one because the policies are designed to address different exposures.
What information may be needed for a management liability review?
When reviewing management liability insurance, we may need information about:
- company and ownership structure
- directors and officers
- number of employees
- annual turnover and financial information
- nature of business activities
- employment practices and recent disputes
- subsidiaries or related entities
- acquisitions, mergers or ownership changes
- previous management liability claims or circumstances
Additional information may be required depending on the business, policy and sections being sought.
When should management liability insurance be reviewed?
A review is particularly worthwhile when the business has:
- appointed or changed directors
- materially increased employee numbers
- restructured management
- acquired another business or entity
- introduced new subsidiaries
- changed ownership
- entered new regulatory environments
- experienced an employment dispute
- received a regulator complaint, notice or investigation
- become aware of circumstances that could lead to a claim
Annual renewal is also an opportunity to check that the insured entities, directors, staff numbers, limits, sub-limits and retroactive position remain appropriate.
What may not be covered?
Management liability policies contain exclusions, conditions, excesses and limits.
Depending on the policy, cover may not respond to:
- known claims or circumstances arising before the applicable policy period
- deliberate fraudulent, dishonest or criminal conduct
- certain employee entitlements
- bodily injury or property damage that belongs under another type of liability insurance
- cyber incidents unless specifically covered or extended
- liabilities falling outside the insured management activities
- contractual liabilities beyond what would otherwise apply
- fines or penalties that cannot legally be insured
This is not a complete list.
The relevant policy wording, schedule, endorsements and circumstances of the claim determine how the insurance responds.
Example: an employment dispute becomes a formal claim
Illustrative example
A regional business terminates an employee following ongoing performance and workplace issues. The former employee alleges the dismissal was unfair and seeks compensation.
The business disputes the allegation, but the matter progresses through formal employment proceedings and legal representation is required. Management time and defence costs begin increasing even before the dispute is resolved.
The employment practices liability section of the management liability policy is notified. Depending on the wording and circumstances, the policy may respond to eligible defence costs and certain covered settlement or compensation amounts.
Example provided for general illustration only. Cover depends on the insurer, policy wording, sections selected, limits, exclusions and circumstances of the claim.
Management liability insurance across Australia
RMA Insurance Brokers assists private businesses, farming entities and other organisations across rural, regional and metropolitan Australia.
We work with businesses where directors, managers and owners are closely involved in day-to-day decision-making and where management exposures can sit alongside broader business risks.
We also work closely with rma network Livestock & Property Agents, providing strong connections with businesses throughout regional Australia.
Our services are not limited to rma network Members. Businesses across Australia can contact RMA Insurance Brokers for management liability assistance.
Why RMA Insurance Brokers?
Management liability policies can look similar at a high level while differing substantially in their sections, limits and exclusions.
RMA Insurance Brokers can help you:
- review the business and ownership structure
- identify directors and entities requiring consideration
- review employment practices exposures
- consider statutory and regulatory exposures
- compare limits, sub-limits and excesses
- review claims-made continuity and retroactive position
- assist with notifications and management liability claims
Our focus is on understanding how the business is structured and managed and helping arrange cover around those exposures.
Frequently asked questions
What does management liability insurance cover?
Depending on the policy, management liability insurance may include directors and officers liability, corporate liability, employment practices liability, statutory liability, crime and certain defence or investigation costs.
The sections, limits and exclusions differ between insurers.
Who needs management liability insurance?
It is commonly considered by privately owned companies and other businesses where directors, officers and managers make decisions on behalf of the organisation.
It may be particularly relevant where the business employs staff, operates through a company structure or is subject to regulatory obligations.
Does management liability cover unfair dismissal claims?
Employment practices liability, often included within management liability policies, may respond to certain claims involving unfair or wrongful dismissal, discrimination, bullying or harassment.
Cover depends on the policy wording and circumstances of the matter.
Are fines and penalties covered by management liability insurance?
Some policies may provide statutory liability cover for certain fines or penalties where insurance is legally permitted.
Not all penalties can be insured, and defence and investigation costs may be treated differently.
What is the difference between management liability and professional indemnity?
Management liability generally addresses claims arising from the management and administration of a business.
Professional indemnity generally addresses allegations arising from professional advice or services.
Businesses with both management and professional exposures may need to consider both policies.
Related insurance
Professional Indemnity Insurance
Insurance considerations for professional advice, services, errors or omissions alleged to have caused a client financial loss.
Business Insurance
Broader insurance for business property, interruption, theft, equipment and other commercial risks.
Liability Insurance
Public and products liability insurance for third-party injury and property damage exposures.
Cyber Insurance
Insurance considerations for cyber incidents, data breaches, business interruption and incident-response costs.
Claims Support
RMA Insurance Brokers support for businesses managing insurance claims and insurer communications.
Construction & Contract Works Insurance
Insurance considerations for residential, commercial and rural projects, works in progress and associated liability exposures.
Review your management liability insurance
Directors, employees, business structures and regulatory exposures can change as a company grows.
Whether you are arranging management liability for the first time or reviewing an existing policy, RMA Insurance Brokers can help assess whether the cover still reflects how the business is structured and managed.
The information on this page is general information only and does not take into account your objectives, financial situation or needs. Cover is subject to the terms, conditions, limits and exclusions of the relevant policy. Insurance products and available cover vary between insurers. Please review the relevant policy documentation and obtain advice appropriate to your circumstances before making a decision.