"Management Liability" refers to a combination of liability insurance policies designed to protect organizations and their directors, officers and management employees in the event of legal action against them for alleged wrongful acts arising out of management of the organization.
Management liability is primarily comprised of three distinct types of liability coverage:
- Directors and Officers Liability (D&O)
- Employment Practices Liability (EPL)
- Fiduciary Liability
Policies designed to cover these exposures developed separately over a number of years until insurance companies began marketing and selling them in a single policy. There are a number of such policies available from different insurers. The types of combinations are as numerous as the insurers that offer them, ranging from a single insuring agreement for all three coverages to separate coverage parts for each one.
Some insurers have expanded their policies to include other coverages closely related to management issues, such as professional liability, crime, workplace violence and cyber liability.
Why Organizations Need Management Liability
All types of organizations -- private and public and for-profit and not-for-profit -- find themselves increasingly exposed to management liability claims from a wide range of events that result in costly lawsuits and government fines. These events can be disruptive in the extreme. Small companies can quickly face financial ruin and large companies may find it difficult to quickly or fully recover from the resulting administrative and financial disruptions.
In some cases, individual directors, officers and managers are targeted separately from the organization and face loss of their personal assets. Without the backstop provided by management liability insurance, an organization might find it difficult to hire or appoint and retain highly qualified individuals to manage the organization.
The Chubb 2013 Private Company Risk Survey, published by Chubb Group of Insurance Companies, revealed that almost half of the surveyed private companies experienced at least one professional or management liability loss event in the three years prior to the survey, including D&O, EPL and fiduciary liability.
On the other hand, only about 25 percent of the companies purchased any one of these coverages during that time, despite the respondents' heightened concern about the risks. When asked "why" the company had not purchased coverage, many of the executives believed their companies already had proper insurance protection with their general liability policies.
Insurance agents who are on the front line of communication with these executives should clearly and effectively unravel these misconceptions. Millions of prospects are waiting.
Management Liability on InfoCentral
The Management Liability section of InfoCentral includes articles in the Technical Reports section describing each of the three main coverages, with additional articles addressing specific issues within the coverages. In addition, the Client Communications section contains articles prepared by the IIAT staff to answer common questions asked by agents' clients and consumers.
Here are quick links to these articles.