Also known as Directors & Officers Liability Insurance, it is generally accepted if a financial loss is sustained in the course of the general management of a company and includes various elements of business operations-Shareholders, Suppliers, Customers, Employees, Competitors and Regulators.
Even with a skilled and experienced management team, some companies encounter unanticipated threats or risks that, due to their complexity or nature, are better off mitigated through insurance protection.
The potential of being sued has increased dramatically. A report from Chubb Insurance shows the following claims statistics:-
48% come from Employees;
43% come from Government Regulators;
5% come from Shareholders;
2% come from Customers;
2% come from other sources
42% come from Employment Practices;
30% are Directors & Officers Claims;
19% come from Employee Crime;
7% are Statutory Liability Fines & Penalties;
2% come from other causes.
Below are some claims examples that illustrate the potential of incurring a loss that would be covered by a good Management Liability Insurance policy.
Facts: A medium sized retail business with multiple locations. A store manager was skimming cash transactions and only banking a portion of cash takings over an 18 month period.
Outcome: Insurers paid out $116,000 in excess of the policy deductible.
Employment Practices Liability
Facts: An advertising agency with 23 staff advertising for an Account Manager position. 5 candidates are interviewed. An aggrieved applicant complains to HREOC about not being selected.
Outcome: Insurers settled for an amount of $20,000 plus costs of $11,000.
Directors & Officers Liability
Facts: A retailer advised one of its suppliers it should increase inventory because business was expected to increase significantly. Business did increase for the retailer but they used another supplier. The original supplier sort damages against the retailer.
Outcome: Insurers paid $500,000.
Facts: An employee of a snack food manufacturer lost their arm after being pulled into the blades of a dough cutting machine. Workcover found that a guard device had been removed & a safety mechanism disabled.
Outcome: NSW Industrial Relations Commission fined the company $120,250.
Facts: A cookware manufacturing company became aware that it had produced a 30cm saucepan lid which was susceptible to cracking when exposed to high temperatures. The company sent out a press release to recall the faulty product. Although the recall of this potential product was only 5% of the company's revenue, the whole experience had the capacity to lead to a chain of events which could set in motion the recall of up to 50% of the company's annual revenue.
Outcome: The Company incurred $45,000 in retaining the services of an external crisis management company to oversee the recall and to ensure that any damage to the company's reputation was minimal. In the circumstances, the insurer deemed that the crisis containment extension of the policy was enlivened and reimbursed the company the full amount of the $45,000.
For those of you that do not yet have this as part of your insurance protection, please contact Brett Thornthwaite of Waratah Insurance Brokers at www.waratah-insurance.com.au to discuss the benefits and costs. Since 1990 Waratah Insurance Brokers have been helping all types of companies identify and manage the "risks" that can seriously affect their business.They guarantee to put in place affordable solutions that will respond quickly and as expected when loss or damage occurs. If you are a manufacturer, contract plant operator / hirer or other type of business that has 10-100 employees, we are the go to "protection professional" that will help guide your way through the complexities of "risk management" and "insurance".