Management Liability Insurance – why all members need this cover
Risk Adviser/Corporate Account Manager
When considering insurance for their recruitment and labour hire business, RCSA members naturally consider the tangible assets of the company.
However, as a business owner or manager making operational decisions day in and day out, what protection is in place to cover you as an individual?
There is a vast array of operating exposures your business could be subject to which, if not adequately covered, could have crippling financial implications for both your business and you individually as the manager or owner of the company.
Due to the pandemic there has never been a more challenging time for members running a business and keeping up with various, and sometimes complex, legislation such as employment law and work health and safety is an often-painful journey.
Despite the best intentions, breaches of legislation and compliance can still happen and stakeholder expectations can be mismanaged.
These scenarios can bring liability exposure to company directors, officers and managers.
That’s why management liability insurance is critical to every member’s risk management strategy.
This package of covers will provide protection for personal liability, fines and penalties, employment practices claim and theft by employees or third parties.
The policy covers the following exposures:
Protects directors and officers from claims arising from alleged wrongful acts.
Coverage is afforded to the insured entity and includes but is not limited to:
• Personal liability
• Fines and penalties
• Outside directorships, including workplace health and safety
• Automatic unlimited run off for retired directors
• Pre-investigation and investigation costs
Provides protection from claims arising from alleged wrongful acts against the business. Cover includes, but is not limited to:
• Environmental violation defence costs
• Defence costs including work health & safety defence costs
• Breach of contract defence costs
• Death or disappearance of named insured director
Employment Practice Liability
Protects the business from claims for wrongful dismissal or discrimination by past or present on hire employees, candidates or clients.
This includes cover for allegations made against the insured entity for discrimination on the basis of sex, race, age, religious beliefs and disability.
Protects the company’s balance sheet and bank accounts from fraud and dishonest activities carried out by employees or third parties.
Protects individuals and the company against fines and pecuniary penalties. This includes defence and investigation costs as well as enforcement expenses.
Tax Audit Cover
If your business receives an unexpected tax audit, this gives insurance relief for the costs you incur as a result of this
Examples of management liability claims
An on-hire claimant alleged that they were made redundant following a workers’ compensation claim being settled out of court. A settlement, as well as legal costs, were paid.
An on-hire sales manager was terminated on the basis that his position had been made redundant. The ex-employee issued proceedings to the Human Rights Commission alleging that he had been wrongfully terminated. His argument was that someone else had been promoted into his position and that his former role was not redundant.
The ex-employee was able to prove his case and, accordingly, the Commission determined that there was wrongful termination and ordered the employer to reinstate the employee by paying him $50,000 in damages and costs. This cost was covered by the policy.
An on-hire employee manipulated an accounts payable system. The employee created non-existent customers and generated purchase orders and invoices to transfer money to the fake accounts by accessing other employees’ authorisation details. An internal audit eventually discovered the total losses and our client claimed on the policy for reimbursement.
Work Health & Safety
A client faced WorkSafe prosecution after an on-hire employee was severely injured when he was struck by a truck vehicle and pinned between the truck vehicle and a tow motor.
The insurer met the defence costs and fines.
OH&S & Statutory Liability
An apprentice chef for an insured client’s hotel restaurant was busy preparing for the dinner service.
Unfortunately, he suffered a severe injury by slicing his hand. A full occupational health and safety investigation began which led to prosecutions.
The prosecution alleged that the insured company and the recruiter failed to provide adequate training and supervision to the apprentice.
The policy terms were activated, and indemnity was granted.
The case was vigorously denied and the client successfully defended all allegations.
However, despite their efforts in defending the claim, there was a fine of $25,000 and loss of $20,000 in legal defence costs. These were covered by the policy.
If you would like more details on the benefits of a management liability policy or discuss how these exposures can affect you, please contact RCSA Insurance, we are ready to assist.
Victoria Watts is a very experienced insurance adviser specialising in professional services insurance placement, servicing, contract advice and claims.
With over 35 years’ involvement in insurance as an in-house legal advisor, risk manager/insurance buyer and as a broker, Victoria’s client knowledge has encompassed advising an extensive number of professional services sectors, including managing a book of recruitment and on hire clients.
Victoria is uniquely placed to provide wide ranging advice as to the best insurer option for a specific risk and to support clients in mitigating their exposures.