Management Liability Insurance

Management Liability InsuranceThis is an awfully boring title for an insurance which can save your home and your marriage (or civil partnership) and which is paid for by your company without it being a benefit in kind! So please read on.

Management Liability insurance used to be called Directors Liability and in the olden days (over 10 years ago) had to be declared to HMRC but thankfully now it doesn’t – and it covers more than Directors, as anyone in a Management role within a company can be personally sued.

Yes – personally.

Did You Know That If You’re A Manager Or A Director You Need To Consider Management Liability Insurance

The safety blanket of working for a limited company does not apply any more because government agencies, customers, suppliers or employees can all sue individual directors or managers if they feel the individual person is the one to blame for whatever went wrong.

As a shareholder your liability is limited to the value of your shares. As a director, the law says you have unlimited liability.

As well as the Companies Act 2006, the following legislation also impacts specifically on company directors;

  • Insolvency Acts 1986 & 2000
  • Company Directors Disqualification Act 1986
  • Value Added Tax Act 1994
  • Data Protection Acts 1984 & 1998
  • Environmental Protection Act 1990
  • Competition Act 1998
  • Enterprise Act 2002
  • Bribery Act 2010

For small businesses you need to know about the Small Business Enterprise and Employment Act 2015.  This Act enables administrators and liquidators for the first time to assign insolvency claims, such as claims for wrongful trading, fraudulent trading and transactions at an undervalue, to third parties. The Act also enables courts to compensate creditors who have suffered loss as a result of a director’s misconduct.

Reasons Why Management Liability Insurance Is Very Important

Its human nature to read about other people’s misfortune (that is how newspapers have lasted so long) so here are some classic and genuine claim examples (with thanks to Markel Insurance who are one of the main insurers operating in this sector);

Company directors questioned over fatality

Our client operated road sweeping services using motorised vehicles. Unfortunately one of these vehicles was involved in a fatal accident. This resulted in police investigation of two company directors. One of the directors was accused of aiding and abetting the causing of death by dangerous driving. Markel’s claims team provided support and legal services. The case progressed to trial, but in view of the director’s health proceedings were stayed. While this meant the director was never tried, Markel still incurred defence costs of over £118,000 and legal expert’s costs of over £3,000.

Breach of health and safety regulations

construction company suffered a near miss when a huge pane of glass fell from the fifth floor of a redevelopment project onto the pavement. Miraculously, no one was injured but the Health & Safety Executive made a site visit the following day. This revealed a number of legislative breaches. A variety of actions were subsequently brought against the directors resulting in costs of £45,000.

Vehicle defects results in fatal road traffic accident

One of our insured’s vehicles was involved in a fatal road traffic accident. Initially it was believed that the claim was due to breach of regulations in relation to tachographs. As such, the motor insurers thought this would not have a bearing on the motor claim so would not instruct solicitors. The client appointed their own solicitors and various directors and employees were interviewed by the police. These interviews were in relation to breach of the EC Working Rule Directive. This is when we got involved and agreed to cover costs involved. Things developed further and it was found that there were a number of defects present in the vehicle that had contributed to the collision. These defects were known to the Transport Manager when the vehicle took to the road. The driver of the vehicle was also found to be talking on his mobile phone.

The directors were investigated in relation to the offence of manslaughter by gross negligence (directors and officers section) and the company for corporate manslaughter (entity defence section). The police obtained evidence to prosecute the transport manager. The fatality was reported in the local press and there was press coverage throughout the trial. The cover available in the Markel policy triggered the use of PR crisis management assistance. The insured appreciated this help as essential assistance with intrusive press interest. Markel was closely involved in helping the insured with the official investigation. There were also expenses incurred defending the prosecution of the transport manager who was charged with aiding and abetting dangerous driving. The total claims costs and expenses exceeded £200,000. The premium paid for the period of insurance was only £600.

The Grenfell disaster has also seen an increase in demand for Management Liability insurance from Residents Associations and Property Management Companies – for sadly obvious reasons.

This type of policy is often extended to include Corporate Legal Liability, also known as Entity Defence and Employment Law Protection – a classic example of which occurred when an extremely well known football manager publicly questioned the team doctor, leading her to resign and sue the manager for constructive dismissal.

Whether they held Management Liability insurance is not known, but as the final payout from both the club and the individual concerned exceeded £5 Million ones hopes that they did!

Whether you are a Manager, a Director or Proprietor of a business you can be assured of our expert advice on Management Liability insurance and knowledge of a very wide range of business sectors, afterall we are business insurance specialists with over 35 years experience.  We are also an award winning insurance broker, with a fantastic team of enthusiastic insurance professionals working at our offices in Tamworth, Staffordshire.

Please just give us a call or drop us an email and we will be very happy to help you with any questions, queries or things that may be keeping you awake at night.

Thanks again to our colleagues at Merkel Insurance for their assistance with the information provided on this page.

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