5 Management Liability Loss Claim Scenarios: Real-World Examples

Management Liability Insurance, also commonly known as Directors and Officers’ insurance, is a key component of any comprehensive commercial insurance package. This type of coverage encompasses several key areas: 

• Directors and Officers’ Liability (D&O): Shields directors and officers from personal liability in cases of alleged wrongful acts, such as negligence. 

• Corporate Legal Liability: Covers the company itself against legal action, such as lawsuits for environmental damage caused by its operations. 

• Employment Practices Liability: Covers the costs of defending against employment-related claims, such as wrongful termination.

These real-life claims highlight the importance of Management Liability insurance and its crucial role in protecting businesses and key decision-makers from a variety of unique legal challenges.

1. Director’s Conflict of Interest

A director of a subsidiary, who also served on the board of a supplier to the parent company, was dismissed for serious misconduct. They were alleged to have breached their employment agreement and fiduciary duties, and after issues over allocation arose, legal costs ended up exceeding £25,000. 

This case highlights the risks associated with having complex, interconnected business relationships, such as the one between the claimant and the defendant. It also highlights the critical importance of having robust Management Liability coverage in place to protect against such unforeseen challenges. 

2. Workplace Fatality

After an employee tragically died in an electrocution accident, the company faced investigations by the Health and Safety Executive (HSE) and the Crown Prosecution Service (CPS). The company pleaded guilty to health and safety violations and was subsequently fined and charged. 

In this instance, their Management Liability Insurance ended up covering over £50,000 in legal defence costs. This demonstrates just how valuable this type of insurance can be in mitigating the financial impact of workplace accidents.  

3. Tradement Infringement Dispute 

A clothing manufacturer accused the policyholder of trademark infringement, claiming that the diamond design on their ski apparel was too similar to their own. Legal action was taken, and a cease-and-desist letter was issued, leading to legal costs of £30,000.  

Even seemingly minor design similarities can spark costly trademark disputes. Management Liability insurance is there to help protect against intellectual property risks, should they arise. 

4. Breach of Contract Dispute

The policyholder entered into a contract to develop a product, but the agreement was later terminated. The claimant demanded a refund and took legal action without informing the company, which led to a default County Court Judgement (CCJ). 

The policyholder had to overturn the CCJ and defend the claim, incurring over £18,000 in legal costs. Thankfully, their breach of contract insurance covered these fees, and they were able to secure top legal representation.

5. Disputed Personal Guarantee

After a company entered administration, a claimant alleged that a former director had verbally promised to repay the debt if the company couldn’t. The director denied this, and despite the lack of a written agreement and the weak nature of the case, the claimant pursued it aggressively. While the director ultimately won the case, the legal fees exceeded £15,000, a cost that was covered by D&O insurance.

Protect Your Business with Management Liability Insurance

Whether it’s navigating complex business relationships, defending against workplace accidents, or managing intellectual property disputes, having the right insurance is crucial to your business’s ongoing success

The five scenarios explored above illustrate the diverse range of legal risks that Management Liability insurance can protect against—risks many businesses may not have even considered. This essential coverage not only shields businesses and their leadership from the financial fallout of legal disputes but also provides much-needed stability in the face of legal complexities.

Don’t wait for some unforeseen legal challenge to arise – ensure your business is protected. 

Contact L Wood Insurance Brokers to learn more about how Management Liability insurance can offer peace of mind and financial security for you and your leadership team. 

Source: MPR Underwriting, Management Liability Loss Examples (Directors & Officers and Company/Entity Sections of Cover): 25 for 2025