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What Management Liability Insurance Covers
Management liability insurance covers companies, directors, officers and senior managers against legal liability arising from management decisions, corporate governance issues and employment-related claims.
The policy pays legal defence costs, compensation claims, regulatory investigation expenses and the associated costs of responding. That protection lets business owners and decision-makers act in a regulated and litigious environment without funding a dispute themselves.
Company directors, startup founders, board members and business owners with employees all rely on management liability insurance to safeguard personal and corporate assets. It sits alongside the property and liability sections of your business insurance. It sits within our business insurance range at Fortis Risk Solutions.
Management Liability Insurance: Cover Sections and Benefits
What Management Liability Insurance does not cover
Management liability insurance protects the people running a private company and the company itself. It answers claims about how the business is run, not about the work it sells. Typical exclusions:
- Claims arising from professional advice or services, which sit on professional indemnity
- Injury and property damage, which sit on public liability
- Deliberate fraud or dishonesty by a director, once established
- Prior known claims, investigations and circumstances not disclosed at inception
- Fines and penalties the law does not allow to be insured, including many work health and safety penalties
- The underpaid wages themselves, although defence costs for the claim are usually included
- Claims by one insured director against another, unless the wording gives that back
FRS checks the wording against your board structure, employee numbers and related entities, so trusts and subsidiaries are actually named rather than assumed.
How Management Liability Insurance premiums are set
Management liability insurance is rated on the balance sheet and on the number of people employed, since most claims come from employment disputes rather than boardroom disasters. Factors:
- Turnover, total assets and whether the company is trading profitably
- Employee numbers, which drive the employment practices section
- Industry, with hospitality, construction and labour hire rated harder
- The number of directors, the group structure and any overseas entities
- Financial statements, borrowings and any sign of solvency pressure
- Claims history, including employee disputes, tax reviews and regulator contact
- The limit chosen, and how it is shared across the sections of the policy
Employment practices is the section that gets used. FRS looks at your employment contracts, award classifications and termination process before renewal, since sound process lowers the claim rate and reads well to an underwriter.
How to claim on Management Liability Insurance
These claims rarely start as claims. They arrive as a solicitor’s letter, a Fair Work application or a regulator asking for documents, and the response you send first can decide the outcome. Notify before you reply. The FRS process:
- Send FRS the letter, application or notice the day it arrives, before responding to it
- Do not admit liability, agree a settlement or sign a deed without the insurer’s agreement
- Preserve emails, personnel files, board minutes and the relevant accounts
- Keep the matter to the people who need to know, since the file may be discoverable later
- FRS notifies the insurer and arranges the panel solicitor, including cover for investigation costs
- Defence costs and any settlement are managed through to close, and the notification is recorded for renewal
Contacts sit on our make a claim page.
Management Liability Insurance compared with Professional Indemnity
| Question | Management liability | Professional indemnity |
|---|---|---|
| What it covers | Directors and officers, employment practices, company reimbursement, statutory investigations and crime | Financial loss a client suffers from your advice or service |
| Who buys it | Private companies with directors and employees, in any industry | Firms selling advice, design or professional work |
| Typical trigger | An unfair dismissal claim, a regulator investigation, employee theft, a shareholder dispute | A client says your work cost them money |
| Who is protected | The directors personally and the company | The practice, and its people while working for it |
An advisory firm needs both. A dismissed employee sues the company under one policy while a former client sues over the advice under the other, and the same incident can bring both. FRS aligns the notification wording so neither insurer can push the matter to the other.
Management Liability Insurance FAQs
Any company with directors or officers can face management-related claims. Exposure is highest where there are employees, contractors, shareholders or regulatory oversight, which brings employment disputes, compliance breaches and governance claims. Incorporated not-for-profit organisations are in the same position.
Yes. The Employment Practices Liability section typically covers claims such as:
- Unfair dismissal
- Workplace bullying or harassment
- Discrimination
- Breach of employment contracts
Employment claims are among the most common triggers on management liability policies.
Management liability insurance responds to claims about management decisions, governance failures and employment issues. Claims about the advice or services you give clients fall under professional indemnity insurance instead. Many businesses, professional firms in particular, need both policies for complete protection.
Yes. Directors and officers can be held personally liable for breaches of duty, employment claims and regulatory action. The policy protects personal assets where the company cannot indemnify its directors, including decisions made after an incident covered by cyber insurance.