There are three key areas to a management liability policy:
1) Directors’ and officers’ liability – This section of cover protects the personal wealth of you, the director and any other management staff from the legal costs and awards in defending against civil, criminal and regulatory claims or investigations.
2) Employment practices liability – This covers both you, the directors and the business from claims from potential, current and former employees alleging breach of contract/employment law.
3) Corporate legal liability claims can be made against the directors and officers and also the business itself in tandem. This cover protects the legal entity (business) from defence costs incurred relating to a civil, regulatory claim or investigation.
Without management liability cover, your company assets/funds will not be able to help defend claims made against you, and it is very unlikely that your standard commercial insurance policy will be able to offer you any protection, either. So, the ramifications for you, your family and subsequently the business can be catastrophic.
Possible outcomes of not being able to defend a claim:
It is important to remember that a claim does not have to be justified and factual to initiate costly legal proceedings. Claims can arise from a wide range of circumstances, including:
Litigation can come from anywhere; employees, shareholders, your company, creditors, regulators, customers, competitors, the government, other directors and suppliers or anyone else who feels that they have suffered a loss arising from the director wrongly acting in their position can take you to court.
In a word - yes. But if you are still unsure, please see some claims examples overleaf.
A client ordered topsoil from a few different contractors - however, one of these contractors was mixing contaminated soil in with the other soil being delivered to the site. The environmental agency followed the contractor, witnessed the contaminated soil being dropped off, and consequently looked to prosecute all contractors along with the site owner. The site owner had to go to court to defend himself and show that he was unaware of the soil being contaminated - but if he’d had an MLP policy in place along with Rradar, he would have been better able to defend himself and given advice on how to proceed.
To find out how we can support you and your business, please get in touch:
call 0344 892 1721 or email commercialtradingchelt@towergate.co.uk
Alison Wild BCom (Hons), FMAAT, MATT, Taxation Technician is a highly respected industry professional who has been working with and advising SMEs in areas including tax, pensions, insurance and marketing for over 25 years. She is a Fellow member of the Association of Accounting Technicians (AAT) and Association of Tax Technicians (ATT) and also has 20 years' experience as a residential landlord.
Consistent with our policy when giving comments and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems, we recommend that professional advice be sought.
Date: June 17, 2025
Category: Small Business