Hayes Brokers believes that regular insurance portfolio reviews are important for businesses. Besides cyber liability insurance, the most often unpurchased coverage for business owners is Management Liability insurance.
If you don’t currently have these policies or have never been offered this coverage in the past, it is time to talk to your broker. So what is Management Liability insurance?
The Components of Management Liability Insurance
Management Liability coverage is actually a combination of coverage lines or policies designed to protect business owners, management teams and boards of directors. These entities can be vulnerable to claims no matter how large or small the company is, and whether or not it is private, non-profit or publicly held.
These policies typically include:
Directors & Officers Liability (D&O). Whether or not you have an official board of directors, there are one or more persons who make decisions for your company. Directors and officers may be exposed to costly litigation brought against them and the company due to financial losses brought on by the decisions of this board or the individuals. This coverage not only protects the assets of the company, but also the personal assets of the directors and officers.
Examples of D&O claims include conflict of interest, violation of articles of incorporation and/or bylaws of the organization, transactions with companies in which the directors or officers have a personal interest or any other dealings that cause financial losses to the company or shareholders.
Employment Practices Liability (EPLI). EPLI is valuable coverage that provides for defense costs and damages resulting from alleged or actual employment-related practices for things such as wrongful termination, failure to hire, sexual harassment and more.
Here is an example of an EPLI claim (whistleblower retaliation): an executive for a large company reported his employer because the employer failed to pay overtime to employees and then terminated the employees for filing a complaint. The executive was fired, ostensibly for poor job performance, but was actually fired for siding with the employees who were not properly paid. The settlement of this claim was in excess of $500,000.
Fiduciary Liability. This may go by other names, including Employee Benefits Liability (EBL). This covers defense costs and damages from suits against plan administrators and trustees who oversee benefit plans such as profit-sharing, medical and life insurance and even disability. This coverage is highly customizable, but coverage is limited to those plans that are included in the policy.
Example of a fiduciary liability claim: an employee instructs the administrator of his company-sponsored 401k plan to move his investments from funds that were heavily concentrated in sub-prime investments. While the administrator did process the transfer, it took over a week and in that time the sub-prime investments imploded causing a 6-figure decrease in the employee’s 401k. The employee sued and was awarded nearly 3 times the decreased amount.
Which Should You Choose?
It is hard to pick one coverage that would be the ultimate protection for any company, which is why we recommend all three, either separately or as a package. They are all important for obvious reasons.
Now is the time. Contact Hayes Brokers today to review your current package or to discuss the right Management Liability package for your business.