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Management liability insurance is built for private companies, their directors and senior managers, and it starts to matter the moment you employ staff. An unfair dismissal application to the Fair Work Commission, a regulator’s investigation or a shareholder dispute can be aimed at the company and at you personally. Fortis Risk Solutions compares each insurer’s wording, checks that trusts and related companies are actually named and looks closely at how employment claims and tax audit costs are treated. If a letter of demand or a notice arrives, tell us early so we can notify the insurer and help you manage the claim. Call 03 7046 3766 or send an enquiry.
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:
- Notify: Send FRS the letter, application or notice the day it arrives, before responding to it
- Do not admit liability: Do not admit liability, agree a settlement or sign a deed without the insurer’s agreement
- Preserve the records: Preserve emails, personnel files, board minutes and the relevant accounts
- Keep it confidential: Keep the matter to the people who need to know, since the file may be discoverable later
- We notify the insurer: FRS notifies the insurer and arranges the panel solicitor, including cover for investigation costs
- Manage to close: 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 - Client Case Studies
Cases from the Fortis Risk Solutions broking team. Client names have been removed.
Client case: Unfair Employment Dismissal
The client situation: Our client, a faith organisation, had concerns regarding a staff member’s conduct following a complaint by another staff member alleging inappropriate conduct and concerns about professional boundaries and compliance with the organisation’s Safety Policy. An external investigation engaged by the organisation was undertaken, and management subsequently considered a number of performance and conduct issues. Following a formal meeting, management reached the decision to terminate the staff member’s employment.
After the employment ended, the former employee lodged an unfair dismissal application with the Fair Work Commission and made settlement demands through his legal representative. Our client also sought legal advice and made a counter offer to the former employee. They then notified FRS and asked whether a claim could be lodged under their Management Liability insurance.
After a conciliation, the dispute was ultimately resolved through a settlement of approximately $15,000, with the organisation also incurring $5,500 in legal costs.How the policy responded: Our client’s policy responded under Employment Practices Liability, covering the $15,000 settlement and $5,500 in legal costs. After the $5,000 policy excess, the insurer reimbursed approximately $15,500.
This type of claim would typically be considered under the Employment Practices Liability section of Management Liability. Subject to the insurer accepting the claim and the policy terms, the cover can respond to legal and defence costs incurred in responding to and defending the unfair dismissal proceedings, as well as certain settlements or compensation if covered by the policy.How Fortis Risk Solutions helps: Employment claims are easy to miss because nothing is damaged. We make sure Employment Practices Liability is part of the management liability policy, and when a letter arrives we lodge the claim and deal with the insurer for you.
Client case: Infringement Notice and Fine
The client situation: A real estate agency provided an estimated selling price of $900,000 to $990,000 when appointed to sell a residential property. The regulator subsequently alleged that the agency had failed to ensure the estimated selling price was reasonable and determined in accordance with the requirements of the Estate Agents Act 1980 (Vic). As a result, the agency received an infringement notice with a penalty of $11,855.
How the policy could respond: The claim could fall for consideration under the Statutory Liability section of the agency’s Management Liability policy.
Subject to the policy wording and insurer acceptance, Statutory Liability can provide protection for certain fines and penalties resulting from an unintentional breach of legislation, together with associated defence or legal costs.How Fortis Risk Solutions helps: Agencies often hold professional indemnity and nothing else. We explain what statutory liability adds and arrange it within a management liability policy.
Every policy is different and the outcome of a claim depends on its terms. As your broker, Fortis Risk Solutions compares insurers and policy wording before you buy, and lodges and manages the claim for you when something happens. Talk to us about your own cover.
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.
Related reading
Related pages
Related industry pages: Financial Services Insurance, Childcare Centre and Kindergarten Insurance, Community, Education and Public Sector Insurance
Talk to a broker about Management Liability Insurance
Call 03 7046 3766 on weekdays between 9:30am and 6pm, email admin@fortisrisksolutions.com.au, or send an enquiry and a broker from our Box Hill or Hawthorn office will come back to you about management liability insurance. Tell us what the business does and what the lease or contract asks for, and we take it from there.