Management liability insurance for Australian businesses
Running a business can expose directors, officers and the company itself to claims arising from management decisions, employment matters, regulatory obligations and other business activities. RMA Insurance Brokers helps businesses review these exposures and arrange management liability insurance around the sections of cover that may be relevant.
Support for businesses reviewing management, employment and regulatory exposures.
Overview
Management liability insurance overview
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 and sections selected, cover may be available for directors and officers, the company itself and certain employment, statutory and crime-related exposures.
Management liability is usually structured as a package of different sections rather than one single form of liability cover. The sections, limits, sublimits, excesses and exclusions vary between insurers.
Who it suits
Who should consider management liability insurance?
Management liability is particularly relevant to 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 business may still face an employment dispute, a regulatory investigation, a claim against a director or officer, employee dishonesty or a management claim made against the company itself.
For incorporated farming businesses, professional firms and other companies, management liability sits alongside other business, liability and professional insurance rather than replacing those covers.
For a broader explanation of the cover, see our guide to management liability insurance in Australia.
Cover
What cover may be available?
Management liability policies vary between insurers. The sections selected, limits arranged and conditions shown in the policy schedule determine how the insurance applies, and not every policy includes every section below.
The areas below are commonly considered when management liability insurance is reviewed, subject to the insurer and the policy wording.
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 may 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 may 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 assist with certain investigation and defence costs arising from alleged breaches of legislation.
Some policies may also provide cover for certain fines or penalties, but only where insurance for that penalty is legally permitted.
In several Australian jurisdictions, legislation prohibits insurance or indemnity for monetary penalties imposed for breaches of work health and safety or occupational health and safety laws. Investigation and defence costs may be treated differently, subject to the policy wording.
Cover for investigation costs generally relates to a formal regulatory investigation or inquiry rather than a routine audit or ordinary compliance review.
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.
Crime cover is commonly triggered differently from the liability sections of a management liability policy and may respond when an insured loss is discovered rather than when a claim is made.
Not every digitally enabled fraud event falls within management liability crime cover. Some fraudulent-transfer or cyber events may instead need to be considered under Cyber Insurance, depending on the wording.
Defence & inquiry costs
A management claim or regulatory matter may 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. Defence costs may reduce the amount remaining under the policy limit, depending on the wording.
Insurers generally require their consent before liability is admitted, a claim is settled or claim-related legal costs are incurred. Acting without the required consent may affect the cover available.
An allegation of fraud, dishonesty or criminal conduct does not necessarily remove cover immediately. Depending on the wording, defence costs may continue to be advanced while the allegation is contested, with the conduct exclusion applying once the relevant conduct is established.
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.
Structure
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, the business 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 sublimits, separate excesses or specific exclusions, and defence costs may reduce the amount remaining under the policy limit depending on the wording.
Two management liability policies with the same headline limit can provide materially different protection.
Our article management liability gaps to watch explains why limits, sublimits, exclusions and the definition of who is insured should be reviewed rather than assumed.
Timing
Claims-made cover and continuity matter
Management liability is commonly written on a claims-made basis.
For many liability sections, the relevant policy is generally the policy in force when a claim is first made and notified, subject to the policy wording.
Where a policy includes a crime or fidelity section, that section commonly operates differently and may respond when an insured loss is discovered rather than when a claim is made.
This makes continuity important, particularly where:
a policy is allowed to lapse
the insurer changes and the retroactive position or prior-acts protection is not maintained
a known circumstance is not notified before renewal
the company is sold or ownership changes
the business ceases 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.
Boundaries
Where other insurance applies
Management liability focuses on the way a company is directed, managed or administered, including directors’ conduct, employment matters and certain statutory exposures.
Professional Indemnity Insurance addresses allegations arising from professional advice or services, including claims by clients or other parties who relied on that advice or service.
Public and Products Liability Insurance is primarily designed for third-party personal injury and property damage arising from business activities or products. Some management liability wordings may treat employment-related emotional distress, mental anguish or humiliation differently, so the relevant policy wording should be checked.
Direct cyber incident-response costs, system restoration, data-breach expenses and other cyber-specific losses are usually considered under Cyber Insurance. A separate claim alleging that directors or officers failed to properly manage or oversee a cyber incident may still engage the directors and officers section of a management liability policy, depending on the wording.
Employment practices liability does not replace statutory Workers Compensation arrangements for work-related injury or illness.
Information
What information may be needed for a review?
When reviewing management liability insurance, we usually look at:
company, ownership and subsidiary structure
directors, officers and management
employee numbers and employment profile
turnover, financial position and business activities
acquisitions, mergers, ownership or structural changes
previous claims, employment disputes, investigations or known circumstances
information relevant to crime or employee-dishonesty exposures
Additional information may be required depending on the business, policy and sections being sought.
Limits
What may not be covered?
Not every claim or circumstance will be covered under a management liability policy. Exclusions, limits, excesses and conditions differ between insurers, so some areas are worth checking carefully when reviewing your cover:
- known claims or circumstances existing before the relevant policy period or otherwise excluded by the policy’s prior-knowledge provisions
- deliberate fraudulent, dishonest or criminal conduct once that conduct is established; an allegation alone does not necessarily end cover, and defence costs may continue while the matter is contested depending on the wording
- unpaid wages, superannuation, leave or other employment entitlements that the business was already legally required to pay, with back-pay and reinstatement-related amounts treated differently between policies
- bodily injury and physical property damage that generally belongs under another type of liability insurance, noting that employment-related emotional distress or humiliation may be treated differently
- direct cyber incident losses that fall outside the selected management liability sections or belong under Cyber Insurance
- contractual liabilities assumed beyond the liability that would otherwise exist
- fines or penalties that cannot legally be insured, including monetary penalties where legislation prohibits insurance or indemnity
- claims connected with insolvency, administration or winding up, where the relevant policy restricts or excludes cover
Treatment of insolvency-related claims varies materially between insurers, particularly between company-level cover and protection for individual directors.
This is not a complete list.
The relevant policy wording, schedule, endorsements and circumstances of the claim determine how the insurance responds.
When should management liability insurance be reviewed?
A review is particularly worthwhile when a business has:
- appointed or changed directors or senior officers
- materially increased employee numbers
- restructured management
- acquired another business or entity
- introduced new subsidiaries
- changed ownership or control
- entered materially different regulatory environments
- experienced an employment dispute, regulator notice, investigation or circumstance that may lead to a claim
Annual renewal is also an opportunity to confirm that the insured entities, directors, employee information, limits, sublimits and claims-made position remain accurate.
Broker support
Management liability support built around your business
Management liability policies can look similar at a high level while differing materially in the sections selected, insured persons and entities, limits, sublimits, employment-practices cover, statutory liability, crime cover and exclusions.
We help businesses understand the information insurers require, compare available policy structures and arrange cover relevant to the way the business is structured and managed.
RMA Insurance Brokers works with businesses across rural, regional and metropolitan Australia. Through our relationship with rma network Livestock & Property Agents, we have connections throughout regional Australia. We also support clients outside the rma network and across other parts of Australia.
How we help
How we help businesses
review the business, ownership and subsidiary structure
identify directors, officers and entities requiring consideration
review information relevant to employment practices insurance exposures
consider statutory and regulatory insurance exposures
compare limits, sublimits, excesses and policy sections
review claims-made continuity, prior-acts position and run-off considerations
assist with notifications and management liability claims
Our focus is on understanding how the business is structured and managed and helping arrange insurance around those exposures.
What happens after you enquire?
We contact you
A broker from RMA Insurance Brokers will get in touch to understand the business structure, directors and employees, the insurance currently in place and what prompted the review.
We confirm what is needed
We will explain what information is needed, answer your questions and confirm the next step before approaching insurers.
Useful information to have available
- current management liability policy, if applicable
- company and ownership structure
- directors and officers
- employee numbers
- recent acquisitions, subsidiaries or structural changes
- claims, disputes, investigations or known circumstances
FAQs
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, so the sections selected should be reviewed rather than assumed.
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 management liability policies include statutory liability cover, which may respond to certain investigation and defence costs and, in limited circumstances, to fines or penalties where insurance for that penalty is legally permitted.
In several Australian jurisdictions, legislation prohibits insurance or indemnity for monetary penalties imposed for breaches of work health and safety or occupational health and safety laws. Related investigation or defence costs may be treated differently.
Other fines and penalties depend on the legislation, conduct involved and policy wording.
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, including claims from clients or other parties who relied on that advice or service.
Businesses with both management and professional exposures may need to consider both policies.
Explore
Related insurance
Professional Indemnity Insurance
Insurance considerations for claims arising from professional advice, services, errors or omissions.
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.
Workers Compensation Insurance
Statutory workers compensation arrangements for employers, which differ between states and territories.
Claims Support
RMA Insurance Brokers support for businesses managing insurance claims and insurer communications.
Review your management liability insurance
Directors, employees, ownership structures and regulatory exposures change as a business develops.
RMA Insurance Brokers helps businesses review whether their management liability insurance still reflects the way the business is structured and managed today.
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.