Commonly referred to as Management Exposures, the policies summarised on this page usually cover compensation or damages awarded to third parties, third party legal costs and your own legal defence costs.
A policy combining Directors and Officers Liability, Professional Indemnity, Employment Practices Liability and Fidelity Guarantee. It provides protection to an association against legal liability the association may become liable for whilst conducting its’ activities. The policy can also reimburse the association where it is required to indemnify its’ office bearers when they are accused of wrongful acts during the performance of their duties.
If you are an Incorporated Association or a Not for Profit Organisations such as; Community, Sporting, Social or Cultural Group or an Industry Association, this type of policy is designed to protect you and the personal assets of your officers.
Sharing the aggregate policy limit across the various sections of the policy makes the premium highly affordable.
Also known as Fidelity Guarantee, the policy provides cover for pecuniary (financial) loss which you have sustained directly as a result of the dishonesty of employees.
It is now common for some form of this cover to be included in Management Liability Policies.
The Fidelity Cover itself provides protection against loss arising out of dishonesty of employees, such as stealing of money or theft of goods owned by the business including stock.
Cover for crime through the usage of computers is also available.
The best way to explain this policy is that it has been been specifically designed by the insurance industry to protect against the exposures that arise from Computer Hacking.
The most common events that give rise to claims are Hacking Attacks that usually lead to Breaches of Privacy, inadvertent installation of Ransom Ware on your computers, lost or stolen portable devices that lead to loss of data, breaches of privacy or hacking.
Most policies provide cover for;
- the costs of claims by third parties (usually customers) for failing to keep data secure;
- your direct costs to respond to a breach, such as IT Forensic Costs, Credit Monitoring, Public Relations Expenses and Extortion Costs;
- Business Interruption
You may also be interested in our article on Cyber Liability Exposures
Directors And Officers Liability / Company Reimbursement
Directors’ and/or Officers’ of both private and public companies can be exposed personally to liability arising from claims or allegations of wrongful conduct (mismanagement of the business), whilst discharging their duties. There are approximately 700 laws that impose duties on Directors’ and Officers'(for example: Corporations Act, the various state Workers Compensation and Occupational Health & Safety Acts, Consumer Protection Legislation, etc.). Common Law actions may also attract personal liabilities.
Potential sources of allegations that may lead to legal action are;
- and regulatory bodies.
The personal assets of a director or officer may be at risk in such circumstances, particularly if the corporate entity does not have the financial capacity to provide an indemnity, refuse to provide an indemnity or is legally prohibited from indemnifying its directors and officers.
Most policies automatically provide cover to all past, present and future directors and officers for allegations or claims made against them.
Under the Company Reimbursement section of the policy, coverage is provided to the company to indemnify it where it has provided an indemnity to its’ D&O’s. Any indemnity granted must not breach Section 199A of the Corporations Act.
If you would like to obtain a quotation for this cover, we recommend reading our fact finding document and then contact us.
Entity Employment Practices Liability
Employment Practices Liability (EPL) insurance covers the insured company, its management and employees against claims for wrongful employment practices.
Where a Directors’ and Officers’ Liability policy only covers claims against individual directors and officers for their legal liability for wrongful employment practices, this policy extends cover to the corporation for employment related claims.
The policy can be written as an extension of a Director’s & Officer’s or Management Liability policy or it can be written as separate policy.
Wrongful employment practices include:
- wrongful or unfair dismissal;
- wrongful failure to hire or promote;
- discrimination and harassment;
- misleading representation or advertising relating to employment;
- invasion of privacy; and
- employment-related defamation.
Information And Communication Technology
These policies combine a Public & Products Liability policy with a Professional Indemnity policy to protect against the potential uncertainties of which policy a claim should fall under.
A Public & Products Liability policy provides cover for claims by third parties alleging they have suffered property damage or personal injury where a Professional Indemnity policy provides cover for claims by third parties alleging financial loss due to a breach of your professional duty.
If the two policies are insured separately and, particularly, if different insurers are used, there is a potential for a claim to fall in the grey area between the coverage provided by the two policies.
The grey area arises when trying to determine if , for example, typing information into a system or plugging cables into a server or switch array, is the doing (Public Liability) of the work or is Intellectual Property (Professional Indemnity).
It is preferable to insure these exposures together under a policy which is designed to specifically address this.
The policy provides cover for claims arising from the failure of your products, professional services and/or professional advice. Cover can also be extended to include breach or infringement of intellectual property rights, defamation/libel & slander, breach of confidentiality/privacy, loss of documents/data and some policies can be extended to include defence costs for allegations of breach of contract.
Initial Public Offerings Or Prospectus Liability Insurance
Prospectus Liability or IPO insurance offers protection to the corporation and its directors and officers for claims arising from an initial listing on a stock exchange or the issue of a product disclosure statement (PDS).
It is common for policies to be arranged for either six or seven years (covering the statute of limitations period) from the date the PDS or offer document is lodged. The policy cannot be cancelled once the premium has been paid.
Whilst a Directors & Officers Liability insurance policy can be extended to cover these exposures, obtaining a separate policy “ring fences” this specific exposure and provides a separate limit of indemnity for claims arising from an offer document. This protects the limit of indemnity available to Director’s & Officer’s under the D&O policy.
Because the policy cannot be cancelled, continuous protection is available for the insurance period purchased. This eliminates any potential difficulties that may be experienced negotiating the annual renewal of a D&O policy, should cover be effected as an extension of a D&O policy and a claim arises.
Whilst Section 731 of the Corporations Act 2001 addresses a due diligence defence for prospectuses, a party that has been accused still needs to be able to prove their entitlement to the defence, this is where having insurance provides protection against potentially extensive and expensive legal costs.
Investment Managers Insurance
Investment managers and other professionals providing investment style advice have many exposures whilst conducting their business.
Legislation dictates that Investment Managers must have Crime/Fidelity and Professional Indemnity insurance to protect the fund members.
Whilst not a legislative requirement, obtaining Director’s & Officer’s liability insurance is also prudent to protect their personal assets.
Most Australian Financial Services Licensees providing services to Retail Clients, are subject to specific regulation about the level and types of insurance they must purchase to protect their clients – refer to ASIC Regulatory Guide 126.
A policy typically combines these policies;
- Directors & Officers;
- Professional Indemnity;
Options exist to have one Aggregate Limit of Indemnity (this reduces premium costs by sharing the limit across the three policy sections), or to have separate limits for each policy section. The limit of indemnity can be shared across the three policy sections which has the benefit of reducing the overall premium.
Liability in an MIS to the scheme members rests with the responsible entity and the Corporations Act extends this even if the liability is caused by an agents (authorised Representatives) negligence. The following people have duties which can expose them to prospective claims from a wide range of sources.
- Compliance committee members.
Management Liability policies are a broader version of Directors & Officers Liability policies and have been designed to cover the liabilities of private companies.
Most private companies insure their business assets or protect themselves from Public & Products Liability claims, but do not insure their management exposures.
Directors’ and/or Officers’ of private companies are exposed to personal financial liability arising from claims or allegations of wrongful conduct (mismanagement of the business), whilst discharging their duties. There are approximately 700 laws that impose duties on Directors’ and Officers'(e.g. the Corporations Act, Workers Compensation and OH&S Acts, Consumer Protection Legislation, etc.). Personal liabilities may also arise at common law.
Cover is usually provided for;
- Directors & Officers Liability/Company Reimbursement;
- Entity Liability;
- Employment Practices Liability;
- Trustee Liability;
- Crime/Fidelity Guarantee;
- Taxation Investigation;
- Statutory Liability;
- Cyber Liability is now a common extension.
If you would like to obtain a quotation for this cover, we recommend reading our fact finding document and then contact us.
The difference between a Malpractice and a Professional Indemnity policy is in the insuring clause. A Malpractice policy provides cover for claims by third parties (patients or their families) arising from bodily injury caused by a breach of your professional duty. Bodily injury as defined in most policy wordings includes;
- Bodily Injury;
- Mental Anguish or Mental Injury;
- Illness or Disease;
Other than Professional Indemnity policies designed for certain professions (Architects, Engineers, etc.) policies normally have exclusions for these types of claims.
Private and Public Hospitals, Day Surgeries/Clinics, companies providing ambulatory services, laboratories (pathology and diagnostic), facilities providing care to the aged, counselling services and O.H&S Consultants, D&A Testing Facilities, etc. are the types of businesses that may require this form of insurance.
In their purest form, these policies are designed to cover financial loss suffered by third parties as a result of a breach of professional duty in the provision of professional services. Policies can be written to cover individuals or a corporation including its partners, principals, directors and employees.
Generally purchased by the more traditional professions such as architects, engineers, lawyers and financial service providers (E.G. accountants), any person who is providing advice and/or service for a fee should consider their exposures and the need for this type of cover.
Securities Entity Cover for Publicly Listed Companies
Usually written as an extension to a Directors and Officers Liability policy it provides protection to the corporation for claims arising from the purchase or sale or the offer to purchase or sell securities of the corporation.
Whilst this extension can assist to protect the balance sheet of the corporation, claims arising under this extension reduce the aggregate limit of indemnity available to the Directors’ and Officers’ should subsequent claims arise against them directly.
Unfortunately company Directors do have an obligation to protect the corporate balance sheet and this leads to a “catch 22” situation for them when the Directors and Officers Liability Insurance is used by the company to protect the balance sheet, potentially leaving them with no personal cover and needing to rely on the balance sheet of the company and their personal deeds of indemnity for protection.
Stand alone policies are now available to protect the limits provided by the Directors and Officers Liability policy.
The largest claims paid under Directors and Officers Liability policies in Australia have been paid under this extension (Aristocrat Leisure, GIO and Sons of Gwalia are three such claims).
Any publicly listed company should consider this type of insurance as shareholders are now more than ever aware of their rights and the rise in litigation funding gives even the smallest shareholders an avenue to a class action.