What is management liability insurance?

Management liability insurance is used by companies to buy protection for its management team from a variety of claims. Since employees in key positions often face exposure to lawsuits or even the possibility of blackmail, this insurance offers a variety of protections that are not offered in other policies, including directors and officers (D&O) insurance, employment practices liability insurance (EPLI), fiduciary insurance, and commercial crime insurance. D&O insurance protects corporate leaders from claims made against them. Claims may include, for example, misrepresentation of company assets, misuse of company funds, or breach of fiduciary duty. EPLI covers damages and legal costs resulting from employees who file lawsuits against the company, and can protect management and companies in litigation involving wrongful termination, discrimination, harassment, failure to promote, wage and hour claims, and more. Fiduciary liability insurance protects your business from claims of mismanagement and the legal liability of certain individuals arising out of their role as fiduciaries. Commercial crime insurance generally covers money, securities, and property against employee acts that involve theft, robbery, fraud, extortion, and forgery. The policy can be written to include a few, or many named protections.

Management liability insurance usually covers chief executive officers, managers, and others in the upper tiers of management. This coverage can be written as a single package policy or it can be written as a stand-alone policy. Commonly, the insured must select at least two forms of coverage to qualify for management liability insurance.

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When do I need to be aware of management liability insurance?

A company that relies on high-profile or high-wage employees should consider this type of insurance. It protects managers and officers against the high cost of lawsuits against individuals. It can also be used in cases where a manager's house is vandalized, a son or daughter is kidnapped for ransom, and when extortion is present. The availability of management liability insurance at a company can play a role in attracting and retaining talent.

What is important about management liability insurance?

This is a customizable form of insurance. Policies can be written in a way that cover one or two situations or that cover a wide range of possibilities. There are some other important items you should know about management liability insurance:

This type of insurance can cover many employees, but it is usually reserved for managers, officers, and other high-profile employees.
Management liability insurance package polices are available to not-for-profit organizations, privately held firms, and smaller public companies.
This coverage is meant to provide protections that are not commonly covered by general liability insurance.
The coverage can protect both corporate assets and personal assets of managers.

The cost of management liability insurance will vary from company to company. It is based on several different factors:

You will pay more for management liability insurance if your company has a history of management liability claims.
The more employees your company has, the higher the cost of management liability insurance, especially EPLI.
A new business will pay more for management liability insurance than a company with a proven history of financial stability.
If your business is a high-risk industry, your management liability insurance costs will be higher.