How management liability insurance helps companies protect against key financial risks

In their official capacities, boards of directors and high-level executives bear responsibility for an organization’s actions — and are therefore exposed to unique risks when legal actions are taken against the organization.

Management liability insurance is designed to help protect the directors and officers of a business from these types of lawsuits and mitigates the personal financial risks they may face.

What is management liability insurance and why is it critical?

In a world where legal and ethical expectations are rapidly changing, management behaviors and decisions in even the most conscientious and well-intentioned organizations may fall behind employee, shareholder, client, and other stakeholder standards.

Management liability insurance refers to a suite of products designed to protect the executives, managers, and employees of a business against these potential losses. Along with directors and officers (D&O) coverage, a management liability policy may include employment practices liability (EPL) insurance, fiduciary liability insurance, and commercial crime insurance.

What is D&O insurance?

When a lawsuit is brought against a company for financial loss, the directors, officers, or the organization itself may be named in the lawsuit and need to mount a legal defense. From a director or officer standpoint, the results of these personal legal judgments are most often not covered by a standard commercial general liability policy.

A D&O policy provides peace of mind to board members and management as it mitigates the personal financial risk, they face from performing fiduciary duties. D&O insurance can also be a useful tool to attract talent to an organization because it demonstrates that the organization is prioritizing the indemnification of the management team beyond the balance sheet of the organization itself.  

What is EPL insurance?

Employment practices liability insurance provides coverage to help protect organizations when there are claims and lawsuits over alleged failures to comply with established workplace laws or contracts.

This can include, but is not limited to, discriminatory hiring or promoting, sexual harassment, failure to comply with the Family Medical Leave Act, creation of a hostile work environment, wrongful termination, and breach of written employment contract. 

What is fiduciary liability insurance?

Companies that provide employee benefits such as 401(k) plans or medical benefits are being trusted to manage these financial assets — by definition, they are “fiduciaries.”

Employee benefit plans require a great deal of administration and often rely on third party guidance. When errors occur and a loss is involved, fiduciaries of all types of employee benefit plans may be held accountable for their actions in operating and administering these plans. Some examples of fiduciary-related claims are an employee being improperly denied critical medical benefits due to an enrollment error; or a plan administrator failing to make third party administrators bid for contracts, resulting in less competitive options being made available to plan participants.

What is commercial crime insurance? 

Despite the best efforts of any organization, there are a variety of ways dishonest employees or outside bad actors can steal funds or perpetrate social engineering fraud. Commercial crime insurance helps protect against the direct monetary losses from such criminal actions. Depending on the policy, the coverage may also help with expenses relating to proving the extent of the loss — for example, it may reimburse for forensic accountants.

From competitor lawsuits to employee retaliation claims to benefit plan to social engineering and employee fraud, a suite of management liability coverages can help protect your organization’s balance sheet, reputation, and the personal assets of employees.

Related Product

The ForeFront PortfolioSM is Chubb’s flagship management liability product for private companies, not-for-profit organizations, and healthcare organizations. With up to seven optional coverage parts, each coverage part works as a standalone policy or seamlessly together.