Management Liability and Directors and Officers Insurance

Management liability insurance is designed to respond to claims arising from the way a business is run, rather than from the work it delivers or the products it supplies. It usually brings several covers together under one policy, commonly directors and officers liability, employment practices liability, statutory liability and company reimbursement, with crime and tax audit cover available on many wordings.

Annex Risk Advisory is a Perth commercial insurance brokerage. As a management liability insurance broker, we help businesses understand where their directors, officers and the company itself may be exposed, review the sections and limits they currently hold, and explore options from a range of insurance markets.

What a policy responds to varies considerably between insurers, and management liability insurance is not a standardised product. The sections included, how each is defined, the sub-limits applied to them and the exclusions attaching to them all differ. Cover for penalties, investigation costs and defence costs may be limited or excluded entirely depending on the wording and the jurisdiction.

Reading those sections against how a business is actually governed, staffed and regulated, rather than accepting a schedule at face value, is where broker involvement tends to be most useful.

Management liability exposure exists wherever people make decisions on behalf of a company. That includes private and family companies, businesses with a formal board, businesses run by a single working director, trustee companies, not-for-profits and incorporated associations, and growing businesses taking on external investors or lenders. It is equally relevant to established operators in mining and resources, construction and infrastructure and professional services.

Employment practices exposure is the most common driver. Allegations of unfair dismissal, discrimination, bullying or harassment can be brought by current or former employees regardless of the size of the business, and the cost of responding often falls on the company well before any finding is made.

Statutory and regulatory exposure has broadened. In Western Australia, the Work Health and Safety Act 2020 places due diligence duties on officers personally, and the state carries industrial manslaughter offences. Directors also carry duties under the Corporations Act. Whether a particular penalty can be insured depends on the law and on the policy wording, and some cannot be insured at all.

Management liability is not required by legislation in the way workers compensation is. It is commonly expected by incoming directors, investors, lenders and boards, and is sometimes referenced in shareholder agreements or funding conditions. Limits of $1 million, $2 million, $5 million and $10 million are common in the Australian market.

Where an agreement sets those requirements, the policy needs to be read against it rather than assumed to comply.

Annex takes a risk-first approach. Before approaching any insurer, we work to understand how the business is structured and governed, who its officers are, how many people it employs, which regulators it answers to, and what its shareholder or funding agreements require. That analysis shapes the brief that goes to market, rather than the other way around.

From there we assist with insurance program design and placement, comparing options across a range of insurance markets and looking at which sections are included, how each is defined, what sub-limits apply and how defence costs are treated, alongside premium. Management liability rewards close reading, because two policies at the same limit can respond very differently.

We can also review the insurance obligations in shareholder agreements, funding conditions and commercial contracts to consider whether existing cover aligns with them, and consider how a management liability insurance program sits alongside professional indemnity and cyber, which cover different exposures and are sometimes assumed to overlap when they do not.

If a claim arises, claims management and advocacy is part of the service. We assist with lodgement, documentation and insurer communication, and advocate for assessment under the terms of the policy. Notification timing matters on claims-made policies.

Both directors are active practitioners, and both bring governance experience from ASX-listed companies, so clients deal directly with senior brokers rather than a rotating account team. Cover is subject to insurer approval, policy terms, conditions and exclusions. Annex Risk Advisory is a signatory to the NIBA Insurance Brokers Code of Practice, and our Financial Services Guide and Terms of Engagement are available online.