This article originally appeared in the autumn 2017 edition of Telegraph magazine. Read it online now.
Following the launch of our new management liability scheme, S-Tech’s Kate Rhodes explains what it is, the cover it provides and the benefits to your employees
Imagine you’re the director of a company. It could be any type of company: a start-up, a non-profit or even a FTSE-100-listed organisation.
Whichever you choose for the sake of this example, you will face a range of pressures from various different sources such as stakeholders, employees, regulatory bodies, competitors and customers.
And although you might not realise it, the day-to-day decisions you make may leave you vulnerable to legal action.
What that means, in layman’s terms, is that legal action can be taken against you; a director’s personal liability is unlimited, so your own assets are at risk if you have to foot the bill for costs and damages.
And that’s without considering the effect such actions can have on your reputation and that of your business.
In fact, this is the case for your employees too, even if they’re not at director level. They can all be at risk of personal liability and face the possibility of personal legal action.
While that sounds like a horror story, a management liability policy (MLP) can provide peace of mind.
What is management liability insurance?
Essentially it’s a comprehensive policy with three core sections that cover various aspects of your business. They can be tailored to match the challenges you, your employees and your business are likely to face.
The core covers are directors’ and officers’ liability, corporate legal liability (entity), and employment practices liability. There are also optional extras that can be added on to ensure your policy meets your needs.
Can start-ups get this cover?
If you’re a start-up and are struggling to arrange insurance, we can help. Although most policies tend to be based on the previous year’s turnover, which may not be possible for a new business, we can arrange a policy that takes a range of other factors into consideration.
For example, we would explore funding, shareholder status and business plans to find the right level of cover for you.
We will also factor in when you’re likely to see outside investment so we can make sure you’re covered for any potential shareholder claims down the line. And, unlike lots of other policies, our cover doesn’t have major shareholder or insolvency exclusions, which means you’re covered if you hold a large proportion of
Management liability case study
A director from Company A went to work for Company B. Company A alleged trade secret theft against Company B and the director.
Emails and access to secret information were cited as evidence that the director had given Company B the secrets of Company A to help
it develop its own competitive product.
Four years after the charges were brought, the case was dismissed. Defence costs for both parties were significant and could have been covered by management liability insurance.