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Management Liability Insurance Gow-Gates Insurance BrokersWhy protection is so important?

AFTA@Work Newsletter Article - Thursday 30 October
Gow-Gates

Running any business these days means you face an ever increasing number of potential exposures. Legislation is constantly changing and the responsibilities associated with managing a business and employing staff are vast and numerous.

On top of all of this, massive changes in technology are occurring daily at lightning speed. While new technology can provide great benefits in operating and promoting your business, there are also new risks to be managed.

In running a business, when a breach of company law or regulation is alleged, the focus is on your conduct as a manager and as a company.

You may believe the alleged claim is completely false, but it will still cost you time and money to defend it successfully. Claims can come from competitors, creditors, regulators, employees, customers and unfortunately in some cases, liquidators.

The importance of having correct written procedures in place, including Occupational Health and Safety Manuals, Staff Procedures Manuals and policies in place for Social Media etc. cannot be overstated.

Claims Scenarios
  1. An employee lodged a complaint with Fair Work Australia alleging unfair dismissal. The employee was suspected of stealing and subsequently dismissed. The former employee sought damages of over $250,000. Specialist lawyers were appointed to represent the Company at Fair Work Australia. Whilst the Company was correct to terminate the employee, they had failed to follow the correct process when terminating, and therefore there was liability on their part. The claim eventually settled for $80,000 in compensation and $55,000 in defense costs.

  2. A firms website was hacked, and inaccessible for several days with all data being lost. Luckily the firm had a Cyber liability policy and within hours of notifying their insurer a specialist was appointed to restore data and the website. Total costs paid by the policy $85,000, and in addition, the policy reimbursed the advertising and publicity expenses to contact people attempting to use the website during this time.

  3. An business was thrown into crisis mode with the unexpected death of its senior manager. This manager was responsible for approximately 50% of the company’s business with many longstanding high net worth clients who did not wish for any other consultants to handle their business. The company incurred $28,500 in retaining the services of an external crisis management company to effectively take over, contact clients and reassure them that their business would be looked after and overseen the other two equally competent consultants. In the circumstances, the Insurer deemed that the crisis containment extension of the policy was enlivened and reimbursed the company the amount of $28,500.

The economic exposure of the management risk often remains uninsured in comparison to the standard type of business insurance. Management Liability Insurance policies have been specifically designed for private companies combining several insurance policies into one to provide a broad range of cover. Should your business be a partnership or sole trader, there are other alternatives available for this type of cover.

Management Liability insurance can provide you with the extensive coverage that you require to protect you and your business. Some of the areas included are:-

  • Employee related claims (by past, present or even future employees) such as discrimination, wrongful dismissal and sexual harassment
  • Employee theft and fraud
  • Occupational Health and Safety Breaches
  • Investigation by regulators (such as the ACCC)
  • Breach of directors’ duties, including breach of the Corporations Act

In addition, some Management Liability Policies will now allow you to pay an extra premium to add Internet Liability to the policy or alternatively individual Cyber policies specially designed for your business can be taken out.

There are many different types of protection afforded under the various Insurer’s offerings and it is always best to discuss with your Insurance Broker the types of cover that are most suitable for your business (and your budget!)

Gow-Gates has negotiated a special “lite” version of this policy to give you more options around putting in place this protection as a start, so call us to discuss the options for your business.

If you believe that this issue is relevant to your business, please feel free to contact Rebecca Fleming, Account Manager of our Travel Industry Division at Gow-Gates Insurance Brokers on (02) 8267 9919 or rfleming@gowates.com.au to discuss your circumstances or to obtain a quotation.

Gow-Gates Travel Agent Client Trust Account Fidelity Insurance

Gow-Gates Insurance Brokers advises that persons should not act on the material contained in this article as the items are of a general nature only and may be misinterpreted. We therefore recommend that advice be sought before acting in these areas.