Management Liability Insurance

When considering insurance for your business most people naturally consider the tangible assets of the company.  However, as a business owner or director making operational decisions day in, day out, what protection is in place to cover you as an individual?

Whilst operating a business there’s a vast array of operating exposures, which if not adequately covered, could have crippling financial implications for your business and for you as an individual director of the company, putting your personal assets at risk.

What is management liability insurance?

Management Liability Insurance (‘ML’) covers directors, officers, managers and as well as the company itself against the consequences of mismanagement. An ML Policy is an efficiently packaged suite of insurance products, specifically designed to cover the fundamental exposures faced by key individuals and entities who operate the business, targeted at the SME market.  It can prove a vital component in a business owner’s risk management toolkit.

What is included in a management liability insurance policy?

  • Directors & Officers Insurance – provides protection for directors and the executive management of a business where they can be held personally liable for any actual, or alleged mismanagement of the company whilst performing their duties within the business.
  • Statutory Liability Insurance – offers protection to both insured persons and the company for fines and/or pecuniary penalties imposed by a regulator, for which you are liable to pay (where indemnifiable by Law) for unintentional breaches of certain Acts of Parliament.
  • Employment Practices Liability Insurance – protects both the directors and the company as employers against claims from employees alleging wrongful/unfair dismissal, bullying, harassment and certain other employment-related incidents.
  • Tax Audit Expenses Insurance – covers the cost of the company responding to an unexpected tax audit with the assistance of a registered tax agent.
  • Crime Insurance – protects a business when suffering a direct financial loss, resulting from acts of fraud or dishonesty committed by employees and third parties.


What is the difference between management liability and professional indemnity insurance? 

Professional indemnity insurance protects the business against claims from third parties (for example clients) seeking compensation for loss suffered as a result of your business providing professional advice or services to them, whereas management liability insurance protects the business for liabilities and losses incurred, due to mismanagement of the business.

Management liability insurance claims examples

Unfair dismissal

An ex-employee lodged an application for unfair dismissal with the Fair Work Commission, alleging that they had been unfairly dismissed from their job, because they had not been involved in any misconduct during their employment and the termination process that they went through was unfair.

The insurer engaged a specialist law firm to defend the claim, who were able to resolve the dispute through a settlement agreement. The company was able to claim under the Employment Practices Liability coverage section of the company’s ML Policy for the settlement amount and legal defence costs of $107,348.

Claim against Directors

A lender advanced moneys to shareholders in a private company to allow the shareholders to fund the company’s business. The lender took security over the shares held by those shareholders and later exercised the securities. The directors resolved to transfer the shares to the lender under the security. The minority shareholders sued the directors for wrongful conduct.

The company’s D&O coverage section of their ML policy met the significant defence costs of the directors ($300,000) in ascertaining whether the shares ought to be transferred back to the minority shareholders.

Claim against the Company

The company provided transport and logistics services to the claimant over a five-year period. The claimant sought compensation under the Australian Consumer Law in respect to certain misleading practices carried out by the company.

The matter was settled for a nominal amount at an informal settlement conference. The company was covered for their significant defence amounting to $222,820 under the company D&O coverage section of the company’s ML Policy.

Employee Theft

An employee of a manufacturing company manipulated the accounts payable system to create non-existent customers and generated purchase orders and invoices to transfer money to the fake accounts, by accessing other employee authorisation details. An internal audit eventually discovered total losses amounting to $750,000.

The company was able to claim under the Crime coverage section of their ML Policy for reimbursement of the lost funds.

Work Health & Safety

A young employee suffered a serious crush injury to his hand and amputation of four fingers after an accident at work. WorkSafe alleged that the company and its directors failed to provide a proper induction, adequate instructions on the operation of a press machine and supervision to the employee.

The OH&S defence costs cover under the D&O section of company’s ML Policy was triggered. The insurer appointed and paid for the legal costs of $220,000 relating to the negotiation of an appropriate enforceable undertaking to significantly reduce the risk of such an incident occurring again.

Tax Audit

The company was the subject of an ATO Audit for its tax returns between the years of 2014 to 2017. The insurer approved the engagement of an accountant to assist in responding to the audit. The company was able to claim reimbursement of the accountant’s fees, which amounted to $67,000, under the Tax Audit coverage section of their ML Policy.

The information contained in this fact sheet is meant as a hypothetical guide only. Austbrokers SPT  Pty Ltd does not accept any liability arising out of any reliance on the information contained in this fact sheet.