The exposures with managing a business are vast and varied. All companies (should) insure the tangible exposures of property damage and bodily injury, via their business insurance policy. However, the key economic exposure of the ‘management risk’ often remains uninsured.
When a breach of company law or regulation is alleged, the focus is on your conduct as a manager and as a company.
You may think that a claim is completely baseless or without merit but it will still cost you time and money to defend successfully.
Management liability protects both the individuals and the company in relation to exposures associated with managing a company. The basis of cover is as follows:
Directors and officers: Covers the directors and officers from an alleged wrongful act resulting from negligence, breach of duty, misrepresentations, statutory liabilities such as OH&S, EPA, most acts administered by Commonwealth, state or local government, including actions brought by unions, ACCC, ASIC, the ATO etc.
Company cover: Covers the company where there is a claim against the entity for alleging wrongful acts, including legal defence costs and other costs associated with attending inquiries and hearings.
Employment practices: Covers the company for claims alleging an employment breach, including wrongful dismissal, discrimination, harassment, bullying, deprivation of career opportunity, breach of contract etc.
Trustee: Covers trustees of staff superannuation funds.
Crime: Covers the company for theft by its employees.
One very common area of cover relates to the Work Health & Safety Act 2011, which recently came into force in South Australia and Tasmania, following in the footsteps of NSW, Queensland, NT and ACT.
It is also likely to be introduced in Western Australia before the end of next year, but despite its almost nationwide implementation, it is thought that few businesses understand its implications.
One example of this is that under the new laws, commercial property is now considered a workplace and the property owner is considered a person who is conducting business or is involved in the management of a workplace. Both the real-estate property manager and the owner have a duty to ensure the workplace is safe, including a Workers Health and Safety audit and an essential annual safety measures report. ‘[The new laws] have significant implications for property owners and property managers,’ said Stephen Silk, general manager at Australian Property Compliance. ‘Many building owners are not fully aware of the new obligations.’
These new laws mean that directors and officers are potentially liable for any breach.
If a company engages in conduct that exposes an individual to the risk of death or serious injury or illness, that company could be forced to pay up to $3 million and individuals up to $600,000 and sentenced to up to five years in jail.
This is just one example of what can happen and just reinforces the benefit of having a well-planned and –maintained management-liability policy behind you, should the unexpected happen.
For further information contact your insurance broker.
Steven McInerney
MGA Insurance Brokers
