For Company Directors & Officers -&-
An Organisation’s Voluntary Committee Members & Officials
Management Liability insurance is an important part of any Company’s or Organisation’s insurance cover.
Similar to Directors & Officers insurance; Management Liability insurance actually goes further by offering a wider scope of protection extending beyond ‘management’ to the company or organisation itself.
Typically Management Liability insurance is taken out by:-
- Private Companies [proprietary] – where the significant assets of the company are owned by its directors and/or officers through their personal shareholding.
- Organisations [not for profit] – where voluntary committee members and officials exercise management responsibility over the organisation’s financial and regulatory affairs.
Typical Claims against the management of a company or an organisation - are usually based on allegations of negligence by the management; thus, if a claim is successful the award to a plaintiff could be made against either the management or the company or organisation – or both; hence the necessity to cover both possibilities with Management Liability insurance.
As an example Directors & Officers of a Company or Organisation may be exposed to claims brought against them by:
- Shareholders (ie. statutory derivative actions)
- Members (ie. common law claims, financial failure, general negligence)
- Employees (ie. claims for wrongful dismissal, harassment or wrongful failure to employ or promote)
- Contractors & Service Providers (ie. failure to honour contracts, failure to pay for services)
- Statutory Authorities (ie. actions brought by a statutory body involving breaches of a directors fiduciary duties or negligence in relation to safe working practices and matters to do with discrimination)
- Competitors (ie. allegations of conduct involving anti competitive behaviour)
- The Corporation or Organisation itself (ie. actions brought by a liquidator on behalf of the company or organisation alleging insolvent trading)
Directors exercise extensive powers in the management of their companies, influencing their company's conduct by virtue of their involvement in the decision making process. Resulting from this unique position of power, directors are legally considered to stand in a fiduciary relationship with their company, and are subject to specific duties stemming from that relationship.
A similar fiduciary standard applies to committee members and officials of an organisation [in paid positions or not] however; where company directors have a range of defenses available under ‘business judgment rules’ set out in various versions of Acts covering Corporations, voluntary directors of organisations do not; and are subject to the vagaries of common law.
Indeed, every director and officer of a company or organisation has ' fiduciary duties which require them to;
- act in good faith and for proper purpose;
- avoid conflicts of interest;
- retain directors' discretion; and
- act with due care and skill.
Directors also owe a duty of care to their company or organisation under the common law of negligence.
Directors' fiduciary duties are owed to the company or organisation as a whole and not to individual shareholders, organisation members, creditors, employees or the community. However, in certain circumstances, directors' fiduciary duties may extend to these stakeholders which can make outcomes ever more uncertain especially with an increasing prevalence of courts to hold directors personally liable for their decisions.
Thus, in these highly regulated times; combined with anxious lawyers looking to whoever has the deepest pockets to pay their clients claims, it is imperative to have Management Liability Insurance as part of any business’s, company’s or organisation’s insurance package.
Protect your Position • Protect your Assets • Protect your Company
• Protect Your Organisation
with Management Liability Insurance from RGIB Insurance Broking