10 reasons why a law firm should buy Management Liability cover
Historically, solicitors have tended to believe that if they carry Professional Indemnity (PI) insurance to cover professional errors, plus Employers & Public Liability, then they were appropriately protected from liability claims. Whilst that may have been sufficient for a sole trader or unincorporated practice, with so many law firms now trading as a limited company or perhaps as a limited liability partnership (LLP), in today’s more litigious commercial environment management liability is now a material risk to the business.
A director of a limited company is liable under the Companies Act for the consequences of the management decisions that he/she takes. And if you are accused of breaching your duty in the running of a company, you may be personally liable to defend a claim brought against you and unless your company specifically indemnifies you, your personal assets could be at risk. The answer is a management liability policy that has been designed for the legal profession.
Here are 10 reasons why a law firm should buy;
- Directors & Officers Liability – the policy covers the liabilities arising from actual or alleged wrongful acts committed by the directors and officers of a law firm and for claims made against the limited company or LLP itself. As well as paying the claim, the policy will cover the costs of defending the claim.
- SRA Investigations – complying with an investigation by the SRA can be hugely time-consuming and very expensive, particularly if an investigation develops into an intervention and the law firm has to engage expensive external advisors. The right management liability policy will help protect partners and other officers, especially those serving as COLPs/COFAs, from the potentially very significant exposure.
- Employment Practices Claims – this protects the practice against claims brought by an employee alleging unfair dismissal, discrimination, pay inequality, harassment, or breach of contract. The policy will cover both the defence costs and any award against the practice.
- Defence Costs – if a claim is made against you, then you will very likely need legal advice and perhaps expert opinion to defend the claim, and that advice doesn’t come cheap. In many cases, the legal costs of defending a claim end up exceeding the amount of any settlement agreed with the claimant.
- Statutory Investigations – a management liability policy will cover the costs of complying with an HSE investigation or the Data Protection Act.
- Public Relations Costs – an alleged or actual wrongdoing that attracts serious adverse publicity can severely damage a company’s reputation, either with its clients or amongst its employees, or possibly both. The right management liability policy will pay reasonable fees for a public relations consultancy firm to help limit that reputational damage.
- Outside Directorships – a management liability policy can protect a firm’s staff where they are asked to sit on the board of another company, or to act as an officer for a charity.
- Restrictive Covenants – cover may be included for the cost of pursuing ex-employees who have breached their restrictive covenant, or for defending the law firm’s own staff from such accusations.
- Data Breach Cover – some management liability policies will cover the costs in defending directors against a data breach.
- Support Tools – a policy that is specially designed for the legal profession includes a variety of additional tools, such as legally privileged advice, legal advice lines, legal and business risk management tools and Out of Hours crisis lines in the event of business crime and regulatory emergencies.
What to do next?
For more information on Management Liability Insurance please do not hesitate to contact us 01743 366 350 or email firstname.lastname@example.org