Management Liability Insurance

Management Liability Insurance – (Protects directors, officers and managers of a company)

ARIETE JARDIM, Principal Broker at Gallagher discusses the advantages of Management Liability Insurance.

Managing a Quarry business is complex and comes with many legislative and regulatory obligations. A simple act, error or omission in managing your business can be enough to cause a major financial loss to you or your company.

Even if you think that a claim has no basis or merit, it can still cost time and money to defend it successfully and in our increasingly litigious society this represents a significant risk to businesses of all sizes.

Consider the following:

• 1 in 10 companies are likely to be audited by the ATO at some stage;
• OH&S regulators have increased investigations and prosecutions;
• Fair Work Australia Laws are here to stay and getting stricter;
• Government has increased funding for regulatory authorities (ATO, WorkCover, ACCC);
• There are 5000 individual legislative provisions that can result in fines and penalties;
• Up to 700 provisions can find a director personally liable.

It’s a minefield out there, and even the best-run business can find itself subject to claims made against it which require defending against – even if the allegations are false. That’s where Management Liability Insurance can provide outstanding peace of mind.

Here we outline real-life claims case studies which could conceivably occur to many businesses in the construction sector. How would your insurance respond?

Examples of incident/claim

Example 1:

Background: The insured was prosecuted by the local council for breach of the Local Development Act when it cut down what were deemed to be ‘significant trees’. The insured was facing a maximum penalty of $120,000 per breach.

Policy Response: Statutory Liability

Outcome: After a lengthy defence, the council agreed to withdraw their claim on the basis that the insured pay its own costs of $190,000.

Example 2:

Background: An employee was injured by falling scaffolding. The company was subsequently investigated and prosecuted by WorkCover for breaches of OH&S legislation. As the company had prior convictions, they faced a maximum penalty of $825,000 per contravention of proven.

Policy Response: OH&S Defence Costs

Outcome: The Insured was found to have breached the OH&S Act and was fined $125,000. The fine was not insurable by law as it was criminal in nature. However, defence costs of $265,000 were incurred to defend the matter – and these were covered under the policy.

Example 3:

Background: An Insured transport company received notification from the ATO advising that it intended to audit the insured’s income tax and capital gains tax liabilities for the period ending 30th June 2008 and 30th June 2009. The insured engaged an accountant to complete the review and report on the information required by the ATO. The whole process took over 3 months to complete and the insured incurred costs totalling $26,820.

Policy Response: Tax Investigation

Outcome: Upon the assessing this claim, it was deemed that Section 2.2 (f) was triggered. The costs incurred were deemed to be necessary and reasonable and the insured was reimbursed the amount of $24,320 net of its deductible.

There are many more examples of incidents happening on a daily basis. If you need advice on your company’s exposures, contact Ariete Jardim at Gallagher on Ph: 03 9412 1332 or email ariete.jardim@ajg.com.au

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