Management liability insurance

By James Nicholas New Business Marine Account Executive

Isometric view of a sailboat docked on wooden planks near water, with three people working on it.

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Why is management liability insurance essential for your business?

Many of you will already have a Marine Trade or Marine Trade Combined policy in force to protect your business for public liability, employers’ liability, buildings, contents, stock, plant equipment, business interruption and more, but has your broker or insurer discussed management liability insurance?

Management liability provides cover for directors and senior decision makers of the company for their personal assets should they be negligent in their duties. Without this cover in place, the directors and/or officers of a business would need to surrender their house, car or money in the bank to deal with a claim.

Management liability has four sections which are outlined in the overview below, together with some claims examples to help understand why it’s important to have as part of your insurance programme.

Director & Officers Liability

Protects senior decision makers within a business for claims/allegations brought against them as a result of negligence in their duties as a director or officer of the company. It provides cover for defence costs as well as reimbursing any associated fines and penalties.

Claim Examples:

A Director missed an inspection for plant or machinery, which was subject to LOLAR regulations and an employee was injured as a result. A regulatory body fined the Director responsible. This was covered under this section of the policy.
A Director agreed a contract with a customer to build five boats within a certain timeframe but was unable to keep to the timescales due to labour shortages. The customer sued for breach of contract, loss of income and the stress caused. Defence costs and the compensation were covered by this section of the policy.
A customer felt that they are being mistreated with issues not resolved due to gender, race, age or general mismanagement. The owner of the marina was sued, with the compensation and defence costs being covered by this section of the policy.

Two workers in orange coveralls are repairing a boat on a dock, one standing on the deck and the other on a ladder.

Illustration of a marina with two sailboats docked, a building labeled 'Marine Supplies & Chandlery,' and nautical equipment on display.

Corporate/Entity Liability

Provides a similar level of protection as the Director and Officers section, however, it specifically covers the company if it was sued.

Claim Examples:

A company that sold hardware to a chandlery for use on boats, delivered late and some of the products were found to be faulty. The chandlery sued the company for breach of contract. The award passed down in court, as well as the defence costs were covered.
The competitor of a boat builder made an allegation about the quality of their boats on a variety of media platforms such as the internet, newspapers and social media. The boat builder sued for defamation, with the defence costs being covered by the policy

Employment Practices Liability

This cover will protect directors and/or officers for claims or allegations made by employees in relation to employment law, such as unfair dismissal, bullying, sexual harassment, lack of progression opportunities and more.

Claims Examples:

A team member applied to be the marina manager after many years of service but a Director awarded the job to another member of staff who hadn’t been employed as long but had more management experience and was better suited to the role. The team member sued the Director for lack of progression. This was defended in court, with the resultant costs being picked up under the policy.
A boat builder had a team of staff where one employee felt that they were being bullied by another employee, alleging that the management failed to address the situation to the employee’s satisfaction. The employee sued the directors. Defence costs and the compensation were covered by this section of the policy.
A hire fleet company had a team of customer service agents including meet and greet staff. A manager decided they were unhappy with a staff member due to the way the employee communicated with customers and failed to provide the customer with all the necessary information. The management decided to let the employee go, following which the employee sued for unfair dismissal citing lack of training or warning about their behaviour or how to correct it. Defence costs and the compensation were covered by this section of the policy.

Illustration of a person in an orange jumpsuit and orange hat working with a jackhammer, causing cracks in the ground.

Illustration of a marina with wooden docks and various boats, including sailboats and motorboats, floating on calm water.

Commercial Crime

A policy that includes commercial crime will indemnify you against losses resulting from employee dishonesty or third-party crimes like fraud or embezzlement.

Claims Examples

An engine manufacturer supplied goods to main dealers and retailers, with the goods being paid for in advance. An employee at the engine manufacturer had been stealing a sizeable amount of money, which resulted in the business not being able to supply engines to their customers because of the loss of funds. As a contractual relationship existed, the retailers and dealers were within their rights to sue the Directors for contractual breaches. The defence costs and the compensation were covered by this section of the policy.
A marina with moorings to let was defrauded by an employee who created false invoices for a fraudulent account, into which the moorers paid. The employee then quit the company, leaving moorers arriving without valid mooring bookings and no records of their booking in the system. Due to this contractual breach, the moorers sued the Directors for failing to detect the issue, which had resulted in financial losses for the moorers. The defence costs and the compensation were covered by this section of the policy.

As the examples above show, Management Liability Insurance is an essential component of a comprehensive insurance programme for any business, especially those in the marine industry. It provides crucial protection for directors, officers, and the company itself against a variety of claims and allegations, safeguarding personal and corporate assets. With the increasing complexity of business operations and the potential for significant financial and legal repercussions, ensuring that your business is covered against management-related risks is not just prudent but necessary.

For expert advice tailored specifically to your business and its risks, contact our marine insurance specialists at 01905 930 760 or email us at hello@havenkjcommercial.com.

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Haven Knox-Johnston Commercial is a trading name of Howden UK Brokers Limited, which is authorised and regulated by the Financial Conduct Authority No. 307663. Registered in England and Wales under company registration number 02831010. Registered Office: One Creechurch Place, London EC3A 5AF. Calls may be monitored and recorded for quality assurance purposes

Management liability insurance

Why is management liability insurance essential for your business?

Director & Officers Liability

Corporate/Entity Liability

Employment Practices Liability

Commercial Crime

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