Increasing claims and more aggressive laws covering directors are making management liability insurance a must-have policy.
Analysis of Arthur J. Gallagher’s data over the past three years shows that the overall number of management liability claims has increased by 30 per cent; reflecting the increasing number of companies and owners that have taken out policies to protect their businesses from such risks.
Changed employment laws, tightening economic conditions for almost everyone outside of the mining industry, and regulators extending their focus from public to private companies, are all contributing to making it tougher and more complex to manage business risks.
An increasing trend in this area has been crime-related claims under management liability policies which stem from theft by a formerly highly-trusted employee.
Some might recall the discovery by South Australian trucking company K&S Corporation just over a decade ago that its then company secretary and financial controller had siphoned off $22 million, much of it to support a gambling habit. Just four years ago, the Clive Peeters retail group revealed that an accountant diverted almost $20 million of company funds into their own real estate portfolio. In both cases the individuals were held to account for their crimes, but the financial damage, reputational cost and time taken to sort out the problems were extensive.
Claims for wrongful dismissal, harassment and discrimination have also risen strongly. More worrying for many directors, though, are the growing areas like statutory liability and strict liability imposed by government regulators and laws. Statutory liability covers fines and penalties from environmental or workplace regulators over issues such as chemical run-off into waterways or workplace accidents where an employee fails to follow the company’s policies, procedures and practices.
The inclusion of strict liability terms in state and federal laws has also meant that directors have to prove their innocence to avoid penalty, rather than a prosecutor proving their guilt.
As your insurance broker, we can help to mitigate your risks and minimise what can be a significant financial impact on your business should the unexpected happen. If you would like to know more or discuss this further, please contact one of our experts and we look forward to assisting you.