Ask yourself this: In the event of a claim arising from your capacity as a company director or officer, how well would your current insurance respond?
As a director of a private company and owner of the company itself, you are exposed to a number of risks such as:
- breaching directors and officers duties;
- the company breaching a range of laws and regulations;
- employment practice liabilities (eg. unfair/wrongful dismissal or harassment by other employees);
- crime within the business (e.g. employee fraud);
- tax audit investigation expenses;
- statutory liabilities (e.g. workplace/OH&S legislation) which can involve criminal prosecutions;
Not only can these risks cause immediate financial ruin, but also exposure to lengthy and costly litigation.
Owning and running a business today is tough; company legislation, tax laws, employment laws, statutory regulations and work place health and safety legislation are just the start. That’s in addition to making sales, managing staff, developing customer relationships, planning marketing strategies and hopefully making a profit!
Just the cost of defending a claim, let alone any damages and costs awarded against you based on a simple allegation, can be very costly in terms of time and money.
Consider the following:
- the assets of the company being exposed to significant damages, investigation expenses and defence costs.
- pecuniary penalties against you personally and fines against the company;
- theft or fraud by employees, including the cost to investigate, causing immediate loss to you and the company.
These risks are real for all private companies and are increasingly becoming very common.
You can protect your company and yourself against most of the financial loss arising from these events with a Management Liability Insurance Policy.
Talk to one of our experienced advisors or brokers who can assist in helping you and your business obtain the correct insurance cover. Call us on 1300 400 707 or email us at info@nwcinsurance.com.au.
Claims Scenarios
Missing Money
Scenario
The company discovered a discrepancy in their finances. Investigations were completed by external auditors and it was found that the chief financial accountant was involved in the misappropriation of the funds.
Outcome
The company was able to claim under the Crime Section of their Management Liability Policy for $200,000.
Sexual Harassment
Scenario
An employee of a medium sized company claimed that she was subjected to sexual harassment by fellow employees. She sought an apology from the employees who committed the alleged harassment, as well as compensation for loss of earning capacity and reputation, emotional distress, depression, medical expenses and legal costs from the company.
Outcome
The employee and the claimant were able to reach an agreement at conciliation and the employee was awarded $50,000 in damages, plus legal costs, which was covered by the company’s Management Liability Insurance Policy.
Age Discrimination
Scenario
The company dismissed a 59 year old manager due to poor performance including alienating employees and customers, and a general lack of interest in his job. The dismissed employee alleged he was dismissed due to his age after a younger employee replaced him, with comments by senior management about tending “to get rid of the old guys”. The employee had received regular pay increases based on performance, and poor performance was not noted on the termination form as the reason for this dismissal.
Outcome
The company felt they were innocent of the allegation but decided to settle out of court rather than defending in court due to the high cost. Settlement was $250,000 and legal expenses totalled more than $60,000. These amounts were paid by the insurer of the company’s Management Liability Insurance Policy.
Defamation
Scenario
An ex-employee of a company alleged that the company and its directors defamed him in a circular distributed to certain clients of the company.
Outcome
The matter was settled by payment to the ex-employee of the $170,000 being for damages and his costs. The directors incurred defence costs of $110,000.
Unfair Competition
Scenario
The CEO of a company left to start a new software company and was subsequently sued individually as an officer of the new company by his former employer. The allegations included trademark infringement and unfair competition as the former employer claimed that he had taken a corporate license to market a particular software product.
Outcome
Defendant settled for a payment of $250,000 and expenses of $130,000. These amounts were paid by the insurer of the company’s Management Liability Insurance Policy.
Crime – Theft of Inventory
Scenario
A manager of a company and an employee together manipulated inventory supply numbers of raw material to defraud the company. Both raw products and finished products were stolen and sold by the manager and employee over a two year period.
Outcome
The total loss to the company was in excess of $1.6 million plus costs of a private investigator to uncover the scheme. These amounts were paid by the insurer of the company’s Management Liability Insurance Policy.
Occupational Health & Safety
Scenario
During a busy time, a company employed a part-time contractor who caught his hand in a machine and lost two fingers. This resulted in a full occupational health and safety investigation.
Outcome
Company was found liable for $100,000 plus $45,000 in defence costs. These amounts were paid by the insurer of the company’s Management Liability Insurance Policy.