Management liability insurance is a policy that can help prevent businesses from damaging lawsuits that could destroy them. Every business risks involvement in a lawsuit that could wreak financial havoc. Private companies and nonprofits, in particular, are subject to concerns from their management staff regarding their own level of personal risk. Insurance policies for management liability enable executive leadership teams at organizations of any size to focus on business decisions without fear of personal financial liability or the threat of legal proceedings.
Management liability insurance is not a standard insurance package but serves as a hybrid policy that bundles a combination of coverage to benefit smaller businesses and their leadership teams. A management liability policy includes the following types of coverage.
Commercial Crime Insurance
This type of management liability coverage protects against losses due to third-party fraud or employee dishonesty. The policy may cover property and financial assets from embezzlement, theft, or crimes involving forgery or fraud.
Directors and Officers Liability Insurance (D&O)
D&O policies protect a company’s executive team from personal liability while acting in their capacity as officers and directors. It covers legal defense costs and financial protection for executives who may face a lawsuit for improper conduct or management errors.
Employment Practices Liability Insurance (EPLI)
This insurance policy for management liability protects the company and its employees from lawsuits regarding employment-related issues such as harassment or discrimination. EPLI coverage extends to claims filed by former employees, existing employees, and unhired employment candidates.
Fiduciary Liability Insurance
The Employee Retirement Income Security Act requires fiduciaries to make decisions in the best interest of plan participants. The perceived mismanagement of finances related to the plan can result in personal liability. Fiduciary liability coverage protects the business and fiduciary employees from claims related to alleged mismanagement of benefits.
Kidnap and Ransom Insurance (K&R)
K&R management liability policies protect against losses related to extortion, kidnapping, and ransom demands. They are beneficial for companies that routinely send employees to countries that are considered high-risk.
Professional Liability Insurance
Also known as Errors and Omissions, this policy covers financial losses that could occur due to errors, omissions, or negligent acts.
Who Needs Management Liability Coverage?
While any business with a board of directors could benefit from an insurance policy to cover management liability, small, private companies are at increased risk because they may need more comprehensive financial resources than larger organizations. A recent study showed over 25% of private businesses reported losses from management liability issues over three years. The most damaging lawsuits generally come from vendors, customers, and third parties.
Smaller businesses are subject to numerous risks that threaten the business as a whole and the employees that make decisions on its behalf. They can address management liability with hybrid insurance solutions that address more than general liability policies. These highly customizable insurance coverages can save money while protecting the business and its employees against financial losses due to lawsuits alleging wrongful acts or mismanagement by executives acting while operating the company.
About Securance
From our home base in Texas, Securance serves the insurance needs of clients throughout the country and abroad. With 50-plus years as a trusted advisor to businesses, families, and individuals, we help clients safeguard their hard work and step confidently into the future knowing they are well protected. Contact us today at (713) 977-6606.
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