Today’s highly compliant and fast moving business environment has created some major exposures. In the past, risk was measured on the probability of natural disasters or a one-in-five-hundred possibility of a serious accident.
The current focus, however, is on fines and penalties against companies breaching the law, theft or fraud by people in positions of trust and Directors and Officers being held personally liable.
There has been an unexpected escalation of losses generated through human failings; for example, the inappropriate behaviour by David Jones’ Chief Executive, the unfair dismissal of the Herald Sun editor and the $20m theft by the accountant of Clive Peeters, which forced the company into receivership. In each of these examples, it is the actions of key decision makers that have caused serious financial loss.
Every business is vulnerable, and poor decision making could be part of your risk profile. Management liability insurance will reduce the effects human error could have on your business. When a breach of company law or regulation is alleged, the focus is on the conduct of the manager and the company. Directors are now affected by more than 2,000,000 references under federal, state and local government law. Whilst a claim might be unfounded, time and money can still be spent defending it successfully.
Litigation can have a devastating impact on a company’s bottom line, which in turn will impact both owners and employees. If a claim is made against you or your company, it is vital to have access to experienced legal representation to ensure a good defence strategy is implemented immediately. Having the right insurance will give you access to the right people, who will protect the finances, reputation and future of the company.
Claims Example
Harassment/bullying
A claim was made by four former café staff against certain directors, managers and supervisors of the Insured hotel for bullying, harassment, abuse and sexual harassment. Claims were made against the entity, alleging that it failed to respond to those allegations. Employees claim combined compensation of $200,000.
Outcome
It was determined that clause 2.2(c) of the Policy was triggered and indemnity was extended to the Insured. After protracted litigation, the matter settled for payment by the company of $20,000 per claimant. In addition to this, the company incurred over $150,000 in defence costs. Management liability insurance is specifically designed for private companies and combines several policies to provide cover for a range of exposures.
Key areas of cover include:
Audits: for audits by ATO and Workcover;
Company Liability: for mismanagement claims against the company;
Company Reimbursement: for mismanagement claims against the directors and officers where they are indemnified by the company;
Crisis Containment: for costs associated with public relations to prevent financial loss and defamation through bad press;
Directors and Officers Liability: for mismanagement claims against the directors and officers where they are not indemnified by the company;
Employment Practices Liability: for claims made by employees relating to sexual harassment, discrimination or unfair dismissal;
Fidelity Guarantee: for direct financial loss caused by employee dishonesty;
Statutory Fines: for fines and penalties from government authorities; for example, OHS and Environmental law breaches;
Superannuation Trustees Liability: for mismanagement claims relating to the staff superannuation fund.
The most efficient way to find management liability cover for your specific needs with the lowest premium is by using an insurance broker.
To find out more, contact an OAMPS insurance expert today on t. 1800 240 432 or visit w. oamps.com.au
