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3 Reasons Your SME Should Consider Management Liability Insurance

websitebuilder • Nov 11, 2019

If you run an SME, then you'll have no doubt put some thought into purchasing the right insurance cover for your business. For example, you might already have cover in place for your premises, stock and employees.

As well as covering these assets, you also know that you need to protect your business from a legal dispute. So, depending on your business sector, you may also have set up policies that give you some legal protection, such as Public and/or Product Liability and Professional Indemnity.

However, you may still have a gap in your cover. If you don't have Management Liability insurance, you and your business may not be fully protected. Management Liability insurance covers the costs of defending directors, managers and employees against any claims that are the result of their actions or decisions.

So, why should you think about putting this cover in place?

1. Your other liability policies don't include management cover

Whilst Public and/or Product Liability and Professional Indemnity insurance policies protect your business from certain types of legal action, they don't provide all-in-one coverage. They each cover a specific area such as:

Public Liability. This cover protects you if your company injures a third party or damages their property in the course of your work.
Product Liability. This insurance covers problems caused by one of your products.
Professional Indemnity. This cover protects you if someone sues you because of negligent advice in which you supply.

These are all valuable business insurance options, however, none of them extends their coverage to issues that arise because of the way you run your business.

If someone takes legal action against your company because of something you or one of your employees did or didn't do, these Public and/or Product Liability and Professional Indemnity insurance policies won't necessarily protect you. If you want full coverage, then you should consider a Management Liability policy.

2. You can't control the actions of other people

Whilst you trust your employees, you can't always control their actions. People make mistakes and sometimes make decisions or take actions that you didn't expect or that are out of character.

For example, one of your senior managers could fail to meet required health and safety standards. They may miss a task that your company should legally have done. Your business may have to pay a non-compliance penalty fine.

Or, one of your employees could accuse one of your directors of sexual harassment. If they take legal action and win, then your company may have to pay a significant compensation.

It is impossible to be sure that your staff won’t ever make a serious mistake. You can't mitigate against mismanagement or misconduct unless you micro-manage all of your staff. The whole point of hiring people is to take some of the strain of running the company, away from you.

Management Liability insurance gives you peace of mind protection. If something were to go wrong, then your policy could cover your costs.

3. The buck stops with you

If someone sues your business because of the actions of one of your employees, you could suffer serious financial hardship…and even if you're doing well, you may not have the assets or cash reserves of a larger company.

If you have to pay compensation costs, legal fees, penalties or fines, then your business could really struggle. In extreme cases, these costs may even put you out of business.

Plus, you might have personal responsibility in these legal cases. If you are liable for some of these costs, then you could lose personal as well as business assets.

To learn more about the benefits of taking out Management Liability insurance, talk to Westralian Insurance. Our knowledgeable, professional team will help ensure your business has all the professional risk cover it needs.

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