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The Importance of Management Liability for a Small Business

Article by Annete Herman, CIC, CRM, CRIS,
Insurance Operations Manager, PIAG Insurance

As the owner and operator of a small business, a lot of responsibilities are on your shoulders. Not only do you have employees, suppliers and clients relying on the success of your business, but you may also be held personally liable for allegations of mismanagement, wrongful dismissal, employee fraud, non-compliance with workplace health and safety (WH&S) requirements, and even the costs of a tax audit.

The vast majority of small business owners and directors run their companies with the noblest of intentions and would never knowingly engage in fraud, harassment, discrimination or any other dishonest management practices.

However, even an allegation of mismanagement could come with a heavy legal defense bill – and unfortunately your innocence doesn’t necessarily excuse you from those costs. It’s possible that in the instance of court proceedings a judge could order your false accuser to cover your legal costs, but that’s far from guaranteed – and may not apply to matters that don’t make it into a court of law. In reality, the best protection is a good management liability insurance policy.

While management liability policies differ slightly between insurance providers, they generally cover the legal costs associated with defending yourself against allegations of mismanagement of your company, harassment, wrongful dismissal and fraud.

The four areas usually covered by management liability insurance are:

  • Directors and Officers Liability – Cover for loss in respect of any claim for an error, act, omission or negligence committed by your Directors & Officers
  • Employment Practices Liability – Cover for employment related wrongful act
  • Statutory Liability – Cover for formal or official investigations by regulatory, governmental or authorized institutions
  • Company Liability – Cover for loss to the company for claims due to an error, act, omission or negligence by the company

MLP also covers you against criminal and fraudulent activity. Companies are often the main target of sophisticated criminal networks and disgruntled employees. A crime cover extension can offer valuable protection against an increasing threat of both random and targeted criminal activity. Covid-19 has resulted in many people working from home with increasing opportunities to gain access to unprotected systems. Since lockdown, fraud has increased by 66%, in particular due to people falling for online scams.

It’s important not to confuse management liability coverage with professional indemnity insurance – they are two different types of insurance and play different roles.

Management liability essentially covers you against allegations of mismanagement, while professional indemnity insurance covers against damages arising from professional services or advice you have provided.

Think of it like this: professional indemnity insurance covers the services and advice provided by your company, while management liability insurance covers you in running your business.

MLP insurance is your best protection against mismanagement allegations made against you as the owner and operator of your small business. Importantly, it will help keep your personal assets safe from any claims against you.

Without management liability insurance in place, any claims of mismanagement successfully upheld against you could not only cost you your business, but also put your personal assets under threat.

Please feel free to contact PIAG at 770-433-3050 to see how we can help you and your business.

Did You Know?

Workers’ Comp Insight

Article by Annete Herman, CIC, CRM, CRIS,
Insurance Operations Manager, PIAG Insurance

When discussing Workers’ Compensation with my clients, their reaction is usually the same, “I don’t understand why we are required to have this, the rates are outrageous and it’s too hard to understand.”

Workers’ compensation insurance, also known as workman’s comp or workers’ comp, gives your employees benefits if they get injured or become ill from their job. These benefits can help the employee:

  • Cover their medical care
  • Replace most of their lost wages if they take time off from work to recover
  • Provide disability benefits
  • Give death benefits, like helping pay for a funeral if they lose their life in a work-related accident

If you are in compliance with having Workers’ Compensation in place, the policy is designed to protect you, the employer, if the injured worker or their family sues you for negligence.

Don’t be fooled by advertisements that promise low rates for your workers’ comp. The rates in all states except for the few that run a state program are set by an organization know as NCCI or the National Counsel on Compensation Insurance.

There are ways, however, to discount your premiums if your agent is aware of how your modification factor can impact your rates, and that most businesses are eligible for a 7% discount for a drug-free and safety program that can be written by your agent.

These credits can be applied at any time during your policy. Please feel free to contact PIAG at 770-433-3050 to see how we can help your bottom line.

Let’s get you covered.

No matter how big or small your insurance needs are, PIAG Insurance can find the right amount of coverage for you.

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