Management liability: An insurance that protects your business in essential ways
If you sit down and make a list, you will discover a frightening number of ways in which your business and management team could be deemed liable for a situation. The word ‘deemed’ is an important one. You do not have to have actually done anything wrong for an allegation to be made. However, the minute an allegation emerges, the legal bill starts to build. Trying to tackle any defence yourself is only likely to make matters worse.
Our society has become more litigious and certain employee rights are now well-established and understood. For instance, the Equality Act has its 15th anniversary this year. Having an employee lodge an allegation of wrongdoing is a real possibility.
Regulator actions
Regulators provide the legal framework within which a business must operate, and regulator investigations and probes are another legal process that could impact your business. This could be the Health and Safety Executive (HSE), responsible for ensuring compliance with all health and safety legislation. It could be HM Revenue & Customs (HMRC), selecting your business for a tax investigation. The Environment Agency, or local environmental health officers, might step in if there is a situation relating to pollution. Or maybe your shareholders might allege that you have been financially negligent in looking after their interests?
Did you know there are currently 90 UK regulators? Of course, that’s not all. If you are a company director, you also have very stringent duties under the terms of the Companies Act 2006.
Our society demonstrates a strong desire to hold people accountable for things that go wrong. Accountability is also evolving. Whilst traditionally it was felt to lie with the corporate entity, there is increasingly a move to make individual decision-makers personally liable for wrongdoing or non-compliance. That could be anyone from the head of a hospital in which patients are exposed to risk, or the manager of a warehouse in which a fatality arises.
There are also many ways in which workplace friction can arise, even if you believe you run a tight ship and do your utmost to comply. It only takes one inappropriate comment, one slip-up, or failure to note a problem, and a case could spring up.
The difference between other liability insurances and MLP
Whilst you may think an employer’s liability insurance policy, coupled with a public liability insurance policy, offers the protection your business needs, these covers have their limits. Employers’ liability insurance protects a business that receives a claim from an employee for an accident or illness suffered as a result of their work. Public liability insurance covers claims for property damage or personal injury brought against the policyholder by a member of the public. To cover the vast area of potential legal disputes beyond this, a business really needs a Management Liability Insurance (MLP) policy. This comprehensive insurance is intended to cover legal action resulting from allegations of wrongdoing by a company or its directors. It protects the business entity and its managerial team against the legal liabilities they may face. Cover is commonly provided for costs incurred on legal expenses, plus damages and settlements, if these arise from specific types of legal or criminal claims.
The difference between D&O insurance and MLP
Whilst you may think Directors & Officers (D&O) protection is the same thing, D&O cover is just one of three parts of the protection offered by an MLP policy. D&O only protects the company in one specific way – when directors and officers are deemed personally liable for the wrongful situation that has arisen. That could be down to a breach of duty, trust, or legislation, through making misleading statements or errors, by being negligent or engaging in wrongful trading, or through insolvency or defamation, for instance.
MLP goes beyond this. Its second component is corporate legal liability, which considers a company’s legal responsibility for any criminal activity, including breaches of health and safety laws, which are criminal offences. This responsibility applies to actions by either the company or its employees. This element of MLP also covers situations such as copyright infringement, pollution incidents, and workplace accidents resulting from a lack of action and compliance.
The third element of MLP is employment practices liability, addressing claims brought by employees who feel their rights have been violated. This could be through situations such as unfair dismissal, discrimination, harassment, breach of employment contract, the suffering of stress at work, pay inequality, lack of promotion and career opportunity, or other types of malpractice in an employment context.
Front-foot protection through MLP
Whilst other insurances will only step in once a claim has been made, MLP offers legal advice and representation for both allegations and investigations, providing vital support at the start of the claims process, not just the end. With legal expertise provided at every stage, tribunals and court cases can often be avoided. If they do result, full legal representation is provided, and costs and settlements are covered.
MLP goes even further because it also provides access to a suite of resources and a 24/7 crisis line, which can offer valuable legal guidance. By adopting the right strategies and practices, policyholders can reduce their legal liability risk. By being more aware of what could go wrong and using on-hand resources to stay abreast of new legislation and changes to existing legislation, they can tighten their systems and deliver the right managerial training.
MLP should be viewed as an essential insurance cover in today’s business world, considering all the employment laws, regulations, and societal expectations that businesses of all shapes and sizes are expected to satisfy. Talk to L Wood Insurance Brokers brokers today about getting your MLP protection in place to cover a vast array of potential legal liabilities.