Understanding Directors & Officers (D&O) Insurance and Management Liability Insurance

• integralmedia
• - November 7, 2024

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Directors and officers insurance (D&O insurance), commonly referred to as management liability insurance for small to medium enterprises, is key to protecting directors and senior management against personal liability for financial loss due to lawsuits and claims relating to actual or alleged wrongful acts, breach of duty, or negligence in relation to managing the business.

At Adroit Insurance and Risk, we understand the complex risks faced by today’s business leaders and offer to broker comprehensive coverage tailored to your unique needs.

Who Does D&O and Management Liability Insurance Cover?

• Past, present, and future directors, officers, and senior staff (e.g., line managers or supervisors) are covered.
• Protection against claims of actual or alleged wrongful acts, errors, or omissions in the performance of work-related duties.
• Side A coverage: If the company cannot afford to pay the directors’ or managers’ personal defence costs, settlements, or judgments (or will not pay), the insurance policy may or may not pay these.
• Side B coverage (Company Reimbursement cover): If the company does pay the personal legal costs of a director or manager, plus any damages awarded, the insurance policy may or may not reimburse the company.
• The company (Side C coverage or entity coverage) benefits from protection against the financial costs of legal defence, investigations, and court-awarded damages which the insurer may or may not reimburse.

Who Can Benefit from D&O and Management Liability Insurance?

• Directors, managers and senior staff, since mishaps and mistakes can still happen despite following policies and procedures.
• Directors and senior managers have personal liability for potential criminal actions with jail sentences and personal fines in some states and territories.
• Shareholders and third parties, such as the Australian Securities and Investments Commission (ASIC) or the Australian Prudential Regulation Authority (APRA), can take legal action.

Types of Claims Covered

Management Liability insurance offers protection on a claims-made basis for various scenarios, such as:

• Breach of duty
• Mismanagement or negligence
• Violations of laws or regulations
• Financial misstatements
• Employment practices disputes
• Shareholder lawsuits

D&O and management liability insurance provides robust coverage for for-profit businesses, privately held firms, not-for-profit organisations, and educational institutions. It can shield you from the financial consequences of actual or alleged complaints involving defamation, breach of contract, discrimination, harassment, fraud, mismanagement, and embezzlement.

For corporate leaders and board members of Melbourne companies under the watchful eye of regulatory bodies like the Victorian Managed Insurance Authority (VMIA), Management Liability insurance is a vital safeguard. Without proper coverage, directors’ and officers’ personal assets may be vulnerable to class actions stemming from their corporate governance decisions.

At Adroit Insurance and Risk, we are a brokerage committed to providing the expertise and personalised service needed to help protect your business, leadership team, and personal assets. Contact us today to discuss how we can help you with management liability insurance, including Directors and Officers cover, to give you the peace of mind to focus on what matters most – growing your business.