Management Liability Insurance

Management Liability Insurance helps protect directors, officers and senior managers from personal financial loss arising from claims linked to their decisions and actions at work. It covers legal defence costs and damages for allegations such as breaches of duty, mismanagement and regulatory violations. Employment Practices Liability (EPL) can also be included, providing protection against employment-related claims with fewer restrictions than standard legal expenses insurance.

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Management Liability & Directors Insurance

Management Liability Insurance, the Directors and Officers (including the Senior Employees if they can bind the company) of all companies are now held, at an unprecedented level, to be personally and financially responsible for any actions and decisions they make on behalf of the company with unlimited liability – putting their personal assets at risk if those decisions are tested in the courts.

The multitude of duties and obligations of UK directors and officers is well known; and the legislation and regulation with which they have to contend increases daily. Directors and Officers face significant scrutiny of their actions by fellow directors, employees and shareholders.

Even if a claim brought against a director proves unfounded, defence costs and expert legal advice alone can be financially damaging.

Management Liability Insurance covers the personal assets and liability of past, present and future directors, officers and senior management against claims arising from wrongful acts or decisions made in their capacity as leaders and decision makers.

The duties imposed on Directors and Officers are numerous –

Common Law Duties

Legal principles established from hundreds of years of case law.

Fiduciary Duties

To act honestly
To act in good faith
To act in the company’s best interests
To avoid conflicts between personal and company interests

Duties of Skill & Care

Directors are responsible for their own actions
Expected to exercise the same level of care as managing personal affairs
Must apply the skill expected of a person with their experience

Statutory Duties

Directors may be personally liable where offences arise due to their consent, neglect or involvement.

What Cover Is Available?

A standard Management Liability Insurance policy provides cover for losses arising from claims brought against directors and officers for “wrongful acts” committed in the performance of their managerial duties.

Cover typically includes:

Wrongful Acts

Breaches of duty or trust, neglect, error, misstatement, misleading statements, omissions, negligent acts or other acts wrongfully committed.

Defence Costs

Legal defence costs paid as the action progresses, ensuring individuals do not have to fund their own defence.

Damages, Judgements or Settlements

Including exemplary damages for libel and slander (excludes fines, uninsurable penalties and non-compensatory damages).

Company Reimbursement

Reimbursement to the company when it indemnifies a director or officer.

Investigation Legal Fees and Expenses

Legal costs for official investigations or examinations into the affairs of the company, even where no allegation of wrongdoing is made.

Blanket Cover

Applies to any person deemed to be a director or officer — past, present or future.

Managerial & Supervisory Staff

Cover extends to senior individuals who can influence or bind the company.

Additional Useful Information

Further cover options may apply depending on the policy wording.

Who Is Covered?

Management Liability Insurance generally applies to individuals in roles where they hold responsibility, decision-making authority or the ability to bind the company.

Types of Director

Executive Director

Full-time, hands-on role involved in the day-to-day management of the company.

Non-Executive Director

Often part-time, may hold more than one board appointment, and provides specialist knowledge or oversight.

Shadow Director

Not formally appointed, but whose instructions or guidance the company’s appointed directors are accustomed to follow.

Types of Director

Company Secretary

Responsible for statutory compliance and company administration.

Other Senior Officers

Individuals who manage the affairs of the company and have authority to bind or represent the business.

Claim Examples

Real-world scenarios demonstrating how Management Liability Insurance may respond to claims involving directors, officers, and senior managers.
(Full list provided in the section below.)

Corporate / Entity Liability

There are occasions when an action is brought against the company rather than an individual. In these circumstances, standard Directors & Officers (D&O) policies may not respond. Entity Defence provides cover for the company (“the Entity”) for specific situations arising within the United Kingdom, which are particularly relevant for businesses of this type.

Entity Liability cover includes:

Identity Fraud

Covers the entity’s legal costs and expenses in establishing that someone (other than a director, officer or employee) has fraudulently entered into an agreement with a third party by representing themselves as the entity. Provided the misrepresentation is in connection with the entity’s business and is made within the United Kingdom.

Investigations

Cover’s the entity’s legal costs and expenses in respect of an official investigation within the United Kingdom

Corporate Manslaughter

Covers the entity’s legal costs and expenses in defending a prosecution brought under the Corporate Manslaughter and Corporate Homicide Act 2007

Breach of Contract

Covers the entity’s legal costs and expenses in defending a claim within the United Kingdom alleging breach of contract for goods or services provided.

Pollution

Covers the entity’s legal costs and expenses in defending a claim within the United Kingdom alleging that a director, officer or employee has committed a wrongful act which results in pollution.

Taxation (not all Entity policies)

Covers the legal costs and expenses in our negotiating on behalf of the entity following a tax investigation (including PAYE and VAT) by HM Revenue and Customs and/or in an appeal.

Data Protection

Covers the entity’s legal costs and expenses in defending a claim following a breach or alleged breach of the Data Protection Act and/or in an appeal.

Examples of Management Liability Insurance Claim Scenarios

Management Liability Insurance can help protect directors, officers and senior decision-makers when they are personally named in claims relating to their management actions. While every situation is different and each policy has its own terms, conditions and exclusions, the scenarios below illustrate the types of allegations that commonly arise.

Claims from Creditors

Claims raised by creditors can occur when a business experiences financial pressure or enters insolvency. Directors may face allegations relating to:

Continuing to trade while the business was in financial difficulty
Misrepresentation of company finances
Decisions that may be viewed as disadvantaging creditors

Even when no wrongdoing is proven, the process of responding can be complex and costly.

Claims from Competitors

Competitive industries can give rise to disputes involving:

Alleged misuse of commercially sensitive information
Claims of anti-competitive behaviour
Concerns about marketing practices or contractual arrangements

Such claims often emerge during periods of commercial rivalry or market change.

Claims Involving Contractors or Suppliers

Directors may be personally named in claims relating to:

Contractual disputes
Miscommunication or incorrect authorisation
Alleged breach of agreement or duty

These situations often arise during procurement, project delivery, or supply chain issues.

Customer-Driven Claims

Customers may allege:

Misrepresentation
Errors in agreements
Improper authorisation or approval

These disputes often stem from misunderstandings, delays, or dissatisfaction with service delivery.

Employee-Related Claims

Employment-related issues can result in claims brought personally against directors or senior managers, including allegations of:

Unfair dismissal
Discrimination or harassment
Breach of confidentiality or data handling responsibilities

Where Employment Practices Liability (EPL) cover is included, it can provide support with associated legal costs and awards.

Government & Regulatory Investigations

Directors can be required to respond to regulatory enquiries, including:

Health & Safety investigations
Trading Standards enquiries
Financial or governance-related audits
Alleged breaches of legislation or industry standards

Even routine investigations can involve significant legal representation and preparation.

Claims from Liquidators or Administrators

When a business enters administration or liquidation, directors may face scrutiny over:

Management decisions leading up to insolvency
Financial conduct or record-keeping
Authorisation of transactions

These claims often require extensive documentation and professional support.

Shareholder Claims

Shareholders may bring claims alleging:

Mismanagement
Actions that impact the value of their investment
Concerns regarding communication of financial information

These disputes can be complex and may involve detailed examination of board decisions.

Supplier & Third-Party Claims

Third parties may allege that decisions made by directors resulted in:

Contractual breaches
Financial loss
Miscommunication or delays

These claims commonly involve negotiations, clarification of responsibilities, and formal responses.

Pension Administration-Related Claims (where included)

Certain policies may include cover for pension administration-related disputes, including:

Errors in beneficiary details
Misallocation of contributions or investments
Miscommunication regarding entitlements

These matters are often technical and require specialist support.

Employment Practices Liability (EPL) Claims

Where EPL is included, claims may involve:

Alleged breaches of employment law
Claims relating to workplace behaviour
Compensation awards following tribunal decisions

EPL cover can include legal defence costs, settlements, and compensation awards, subject to policy terms and exclusions.

Policy limits and exclusions may apply, please see policy wording for full terms and conditions.

Management Liability Insurance FAQs

What does Management Liability Insurance cover?

Management Liability Insurance provides protection for directors, officers and senior managers against claims made in connection with their management decisions. Cover may include defence costs, investigations, claims arising from alleged wrongful acts, and certain employment-related disputes, depending on the policy terms and conditions.

Who needs Management Liability Insurance?

It is relevant for businesses of all sizes where individuals have responsibility for decision-making, leadership or governance. This includes directors, officers, senior managers and anyone who can bind the company through their actions.

How is Management Liability Insurance different from Directors and Officers (D&O) Insurance?

D&O Insurance specifically focuses on the personal liability of directors and officers. Management Liability Insurance is broader and can also include additional protections such as company entity cover, employment practice liability, and certain regulatory investigation costs, depending on the policy.

Does Management Liability Insurance cover the business as well as the directors?

Some policies include Entity Cover, which can help protect the business itself against specific claims, such as investigations or allegations brought directly against the company. Availability and scope vary between insurers and policies.

Are employment disputes covered?

Employment Practices Liability (EPL) may be included or added to a Management Liability policy. It can provide protection for legal costs and certain awards relating to allegations such as unfair dismissal, discrimination or harassment, subject to policy terms, conditions and exclusions.

Does the policy cover past or retired directors?

Most Management Liability policies offer protection for past, present and future directors, provided the claim relates to actions carried out during their period of service. Exact provisions depend on the insurer and wording.

Will the policy pay penalties or fines?

Many types of fines or penalties are not insurable under UK law. However, the policy may cover legal defence costs associated with investigations or allegations, depending on the policy wording.

Are regulatory investigations included?

Many Management Liability policies provide cover for defence costs associated with regulatory or government investigations. The scope of protection varies between insurers and may depend on whether a formal allegation has been made.

Does Management Liability Insurance cover insolvency-related claims?

Directors may face claims from creditors, liquidators or administrators during insolvency proceedings. Policies often include defence costs for such scenarios, subject to the specific terms and conditions.

How much does Management Liability Insurance cost?

Premiums depend on factors such as business size, industry, turnover, claims history, and selected levels of cover. A tailored quote is recommended to ensure the policy meets the needs of the organisation.

Contact the Team

Mike Watkinson Dip CII

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We provide tailored insurance solutions across a wide range of sectors. Each policy is designed around your industry’s specific risks, ensuring you’re fully protected, compliant, and supported by our expert team.