Are you a manager, director, or officer of a corporation, or are you responsible for those types of individuals?
Then you need to understand the various types of management liability insurance in order to determine the best type or type of insurance for your company or corporation.
Simply put, management liability insurance is what protects you and the company against the risks and other exposure that comes with running a company; e.g. it protects you and the other directors and corporate officers from liability for mismanagement.
What is Management Liability Insurance?
Management liability insurance is the name commonly used for the package of various insurance policies that are meant to protect the directors and officers of a corporation from circumstances not covered under traditional commercial general liability insurance.
Rather, management liability insurance is usually an additional policy or package designed to cover certain management liability risks and exposures that occur as a result of being part of corporate leadership.
This type of liability insurance will protect you – as an officer or director of a company – from damages and claimant costs awarded against you, legal defense costs, the costs of investigating lawsuits and allegations, and civil fines and penalties.
Some examples of claims that are covered are fraud or breach of fiduciary duty, unfair competition, and misappropriation of trade secrets.
It also covers individual officers and directors as well as the company from lawsuits due to employment practices.
Management liability insurance usually covers legal representation costs for all of the above and more.
How Do You Choose the Right Type of Management Liability Insurance?
The type of management liability insurance that you need depends on the type of company that you are running and the sort of risks that you are exposed in the course of doing business.
You can start with the liability risk definition.
Generally, liability risk can be defined as the risk or threat of the company or individual (or both) having to bear the financial and other consequences of damage due to mismanagement or breaching standards because of a failure of operations, services, products, unintentional wrongdoing, or negligence.
Next, work with your insurance agent to determine the potential consequences of a lawsuit being brought due to one or more of the aforementioned factors, and that will help you – and your insurance agent – determine the amount and type(s) of liability insurance that you need to carry.
How is Management Liability Insurance Different from Professional Liability Insurance?
Management liability insurance and professional liability insurance are often bundled together or paired together by insurance agents, because companies and their officers and directors often need both.
The key difference is that while management liability insurance focuses on the active managing or the actual day to day operations of a company or corporation, professional liability insurance covers a response to claims from third parties against the professional or specialist services (including advice or guidance) that your company provides, not the management of the company.
What Is The Cost Of Management Liability Insurance?
The cost of management liability insurance depends on the type of business you have, the industry that you are in, your location and your role in the business, and the amount of coverage you think you need.
The cost of management liability also depends on multiple factors, including how your contracts are written, whether or not you’ve been sued in the past (successfully or unsuccessfully), your quality control procedures, how your employees are trained, and more depending on the industry or vertical in which your company operates.
What Other Types Of Insurance Are Related To Management Liability Insurance?
General liability and professional liability or errors and omissions (E&O) insurance, are all related to Management Liability and serve a similar purpose – to protect companies and businesses and the individuals that build, run, and work for them.
Ready to learn more about the best management liability insurance policy is best for your company? Contact an ASCO Insurance agent for more information.