What is Management Liability Insurance?
Management Liability Coverage
Management Liability Insurance covers exposures faced by directors, officers, managers and business entities. It includes Directors and Officers (D&O) liability insurance, Employment Practices Liability (EPL) insurance, Fiduciary Liability insurance and Crime Insurance. These coverages can be written as a stand-alone policy or combined in a package. Management Liability package coverage is usually available for private companies and nonprofit organizations. Publicly traded companies opt for stand-alone policies.
Types of Management Liability Coverages
Management liability insurance is a package of insurance policies designed to protect a business and its directors, officers, board members, managers and administrators from lawsuits alleging mismanagement. This type of coverage protects against risks that are not covered under a commercial general liability policy. Coverages include the following:
Directors & Officers Liability Insurance (D&O)
Directors and officers (D&O) liability insurance protects directors and officers if they are personally sued when managing a company or nonprofit organization. The insurance covers costs and settlements arising from wrongful action allegations and lawsuits brought against members of the board of directors, executives or an officer of an organization.
A director or officer can be part of a lawsuit for a company even if they no longer are part of the executive team or no longer work for the organization.
Employment Practices Liability Insurance (EPLI)
Employment practices liability insurance (EPLI) helps safeguard an organization from employee, applicant or third party lawsuits alleging an employment practices violation. EPLI policies protect the company and employees, including past, present, part-time, seasonal, temporary, volunteers and applicants for employment. Beyond damaging a company’s reputation, an employment claim can lead to lower morale, diminished productivity, lost trust and large legal expenses.
EPLI covers the following employment allegations:
Sexual harassment
Discrimination
Wrongful termination
Retaliation by an employer
Failure to employ/hire/promote
Deprivation of a career opportunity
Violation of an employee’s civil rights
Infliction of emotional distress
Fiduciary Liability Insurance
Fiduciary Liability Insurance protects a business against claims of mismanagement of a company’s benefit plan, including retirement plans, 401Ks, medical benefits, dental, life and disability. The Employee Retirement Income Security Act (ERISA) states that fiduciaries are expected to act in the best interest of the plan participants and can be held liable for mismanagement of the plans. Fiduciary Liability Insurance covers losses due to an individual’s negligent administration of benefit plans.
Commercial Crime Insurance
Commercial Crime Insurance covers loss from dishonest employees and third-party theft of money, security and other property. There are different types of crime coverage, including:
Employee dishonesty
Forgery
Computer fraud
Funds transfer
Kidnap, ransom or extortion
Money and security
Money orders and counterfeit money
Management Liability for Nonprofits
Nonprofit organizations should have nonprofit management liability coverage for their directors and board members. Nonprofit board members may be less familiar with running an organization than officers in for-profit businesses, potentially opening them to certain liabilities.
Allegations against nonprofit organizations can come from nonprofit clients, employees, and third parties, including government agencies or funding organizations. These allegations can be costly and can impact the nonprofit by loss of funding and a damaged reputation. Common claims against nonprofit leadership include:
Mismanagement of funds
Conflicts of interest
Breach of fiduciary duty
Wrongful termination
Discrimination
Nonprofit D&O insurance covers the organization and any past, present, and future directors, officers, committee members, trustees, employees and volunteers. The heirs, executors, administrators and legal representatives of an insured would also be covered in the event of an insured’s death, insolvency or bankruptcy. EPLI coverage for nonprofits insures organizations against suits alleging harassment, discrimination, wrongful termination and other employment-related matters.
Dan Zeiler
Dan@zeiler.com
877-597-5900 x134