MANAGEMENT LIABILITY INSURANCE (QUOTES, COST & COVERAGE)
Management Liability Insurance
Holding an executive position with a company can certainly be rewarding, but it also comes with its fair share of risks. Should you make a decision that negatively impacts the organization you are working for, you could be held legally responsible for the effects of the decision you made.
Furthermore, should an action you take affect employees or clients of the organization, you could be held legally responsible.
The risks associated with the role of an executive decision can result in serious legal issues and financial strain. While risk is inherent in this type of position, there is a way that you can protect yourself from them: management liability insurance.
What Is Management Liability Insurance?
Management liability insurance is designed to offer individuals in positions of authority within a company and the company itself against the risks that are associated with running the organization. Without this coverage, management could be at risk of losing their job, losing personal assets, and could be responsible for paying hefty legal fees. Furthermore, without this type of insurance, the entire company could be at risk of being shut down.
International Risk Management Institute, Inc. (IRMI) defines management liability insurance as:
Insurance that covers exposures faced by directors, officers, managers, and business entities that arise from governance, finance, benefits, and management activities (also called “executive liability insurance”). This includes:
These coverages may be written as stand-alone insurance policies or combined into a single, “package” policy. Management liability policy “package” policies usually contain a set of common conditions applying to all of the coverage lines purchased. In most cases, an insured must select a minimum of two types of coverage to be eligible to purchase a management liability “package” policy.
- Directors and officers (D&O) liability insurance
- Employment practices liability (EPL) insurance
- Fiduciary liability insurance
- “Special crime” insurance (covering kidnap, ransom, and extortion exposures).
This arrangement offers meaningful premium discounts because much of the same data is needed to underwrite employment practices, D&O, fiduciary, and special crime coverages. Management liability “package” policies are usually available only to privately held firms, not-for-profit organizations, and small publicly traded companies (i.e., those with annual sales of under $25 million). Large publicly traded firms generally purchase stand-alone policies.
What Does Management Liability Insurance Cover?
Typically, management liability insurance is a package that will offer coverage for Directors and Officers Liability, employment practices liability, and fiduciary liability. Based on the risks and exposures that are associated public, private, and non-profit companies, and policies can be bundled with a specific limit for each type of coverage, or with a combined limit for coverage.
Generally, a management liability insurance policy will offer the following types of coverage for each of the three aforementioned areas:
Directors and Officers Liability (also known as D&O)
- Safeguards directors and officers, as well as the company, against financial losses that result from claims that may be filed against them for an alleged wrongful act.
- Shields the personal assets of a company’s directors and officers, as well as the assets of the company.
- Offers a claims-made policy.
Employment Practices Liability (also known as EPLI)
EPLI offers coverage for defense-related costs and damages that are related to a company being held liable for a real or alleged violation against employment practices. Shields a company and its present, past, seasonal, temporary, part-time employees, as well as volunteers and those who are applying for employment with the company from the following allegations:
- Wrongful termination.
- Liable and slander.
- Violation of an employee’s civil rights.
- Infliction of distress.
- Retaliation against an employee.
- Failure to advance an eligible employee.
- Offers coverage for defense costs as well as damages from claims that are filed against fiduciaries that oversee or administer benefit plans for employees.
- Shields against losses that a benefit plan could incur as a result of fiduciaries negligent or an oversight.
- Covers disability, profit sharing, life insurance, and medical benefits.
Claims Commonly Filed Under Management Liability Insurance
While there are several types of claims that can be filed under management liability insurance, the following are examples of the claims that are most commonly filed under this type of insurance:
- Race, age, religion, or gender-related discrimination against an employee.
- Breaches of the fiduciary duties on behalf of a director.
- Wrongful termination of an employee.
- Harassment of an employee.
- Failure to employ an eligible prospective employee.
- Failure to promote an eligible current employee.
- Breach of intellectual property rights on behalf of directors and/or officers.
- Theft of employees money or property.
Sometimes crime insurance (protect assets from loss due to dishonesty, theft or fraud) and kidnap, ransom, and extortion insurance (protecting organizations & high net worth individuals at home & overseas) are covered under management liability insurance policies.
How Much Does Management Liability Insurance Cost?
The cost of management liability insurance varies from company to company. An insurance provider will take several factors into consideration when calculating premiums. Moreover, the amount of coverage that a company will need will also play a key role in the amount that this type of insurance coverage will cost. Management liability insurance vs directors and officers, management liability insurance coverage, management liability claims examples, difference between d&o and management liability, fiduciary liability insurance, professional liability insurance, d&o insurance & employment practices liability.