Management liability insurance provides flexible protection for business owners and decision makers if they face legal actions for alleged misconduct — a growing area in litigation claims in Australia.
Business owners, directors, senior managers and board members are responsible for upholding numerous laws in their management duties. They can also be held personally liable for various aspects of business or company operations if their decisions or activities contravene these regulatory conditions.
Management liability insurance supports small to mid-sized businesses, generally with less than $10 million annual turnover and fewer than 20 employees.
Case studies — coverage examples of management liability insurance in action
Management liability insurance can cover a wide range of scenarios where businesses might incur liability and loss. Claims made may be invalid but still require investigation and legal defence.
Costs of management liabilities can encompass wide ranging liability and cost such as psychological injuries, exorbitant worker injury claims and potential environmental damage caused by poor business management operations.
Check out how management liability insurance provides financial protection against a broad range of exposures involved in running a company.
Alleged wrongful acts of copyright by directors and officers
When an entrepreneurial business designed and manufactured beverages to sell in supermarkets as an alternative to branded products the original manufacturer, as the patent owner, alleged that the alternative product was a copy of their intellectual property and sued the entrepreneur. Fortunately management liability insurance supported the settlement of the matter.
Professional indemnity for construction production defect
Construction companies subject to claims brought by contractors or final owners who allege defects in the work can face costs in the hundreds of thousands of dollars to defend themselves. In this case the claim ran into millions but the business's management liability insurance supported resolution of the matter without going to court.
Employment practices liability
When a disgruntled employee made a claim that they had been underpaid as a result of being incorrectly categorised as a permanent employee, the staff member also included the company's directors in the legal action. The matter was settled out of court under the business's management liability insurance which also covered legal expenses.
Privacy
During a dispute about an employee's termination the ex-employee alleged a privacy breach with respect to the confidentiality of the termination. A complaint was submitted to the Privacy Commissioner, with the cost in defending the matter covered by the business's management liability policy.
Workplace health and safety
In an unusual maritime accident a crew member fell off a commercial vessel and suffered significant head injuries. Because the boat had not been fitted with safety restraints, the injured man brought a damages claim against the company, which was resolved under management liability cover.
Employee theft
In a bold white collar crime move, a business's former top executive essentially hijacked operations by locking the owner out of all systems and stealing funds and a vehicle. The owner's management liability insurance provided cover under its crime investigations and crisis containment sections of the policy.
Regulatory breach investigation:
A business inadvertently breached COVID-19 restrictions while inspecting a venue, leading to fines and legal costs. In cases like this management liability insurance may cover the costs associated with the investigation and any resulting penalties.
Environmental pollution
After the Environmental Protection Agency (EPA) discovered contaminated storm water in a nearby waterway the adjacent business an inspection of the neighbouring business's premises resulted in allegations of breaches of the Environmental Protection Act. The business's statutory liability cover paid for defence costs and public relations expenses.
Tax audit
When the Australian Tax Office instigated an audit of a company with a number of business entities, the management was thankful for its management liability insurance which covered accountancy costs of $115,000 involved in responding to the investigation.
*The description of some parties has been changed for privacy reasons.
Who can bring a management liability claim?
Legal claims can arise from statutory authorities and regulators such as the Australian Securities and Investments Commission (ASIC) or the Australian Prudential Regulation Authority (APRA), your own company or its shareholders, employees, creditors, competitors or, in a worst case scenario, administrators or liquidators.
Some liabilities apply even after a senior decision maker has left the company in question. Being held personally liable means your own assets are subject to the costs of a legal suit.
Management liability insurance is designed to provide a range of specific protections for business owners and senior managers around their business decisions and management decisions, mainly aimed at containing legal costs and damages settlements. It may also include costs of statutory liability fines and penalties.
What business risk solutions does management liability cover?
Management liability insurance policies typically bundle together several optional or standalone insurances into the one policy to offer protection to for a variety of risks or liabilities that relate to legally required management obligations.
The coverage extends to the costs involved with investigating and defending cases brought against senior managers. These are usually based on the broad categories of:
- directors and officers' liability
- employment practices
- some aspects of workplace health and safety
- crime, theft and malicious damage
- tax audits.
As a full service insurance broker we tailor our management liability insurance to each business's specific needs, with the current organisational requirements a key consideration.
Our comprehensive management liability solution has the scope to evolve with changes to business operations and new risks, such as cyber security.
Given this flexibility, a management liability solution could also include cover for:
- claims of criminal behaviour or impropriety
- statutory liability
- intellectual property.
Get expert advice on protecting against management liability risks
Management liability insurance provides multiple protections for directors and business managers and offers flexibility in adapting the scope of the cover to your individual needs.
As your insurance broker, we can help to mitigate your risks and minimise what could be a significant financial impact should the unexpected happen. If you would like to know more or discuss your business needs further please contact one of our business insurance experts.
Updated 10 July 2025
