10.12.25

What is Management Liability Insurance – And Do You Need it?

In today’s increasingly litigious business environment, claims of wrongdoing are on the rise. Customers, shareholders, investors, and even employees are more willing to hold companies and their leaders accountable for mistakes. Legal proceedings can cost businesses hundreds of thousands – or even millions – and senior staff may find themselves personally liable, facing legal costs out of their own pockets. Management Liability Insurance (MLI) is a comprehensive form of protection designed to safeguard both companies and their leadership teams from a wide range of legal claims. Here’s what it covers, how it works, and why Management Liability for your business may be essential.

What is Management Liability Insurance?

• Legal expenses
• Damages
• Settlements

MLI usually includes three core components:

1. Directors’ and Officers’ (D&O) Liability
2. Corporate Legal Liability
3. Employment Practices Liability

Management Liability vs. Directors’ & Officers’ Liability

While the terms are often used interchangeably in the UK, D&O Liability is just one part of a broader Management Liability Insurance policy.

• D&O Liability covers claims made against directors and officers personally if they are sued for wrongful negligent acts.
• If a company indemnifies its directors and officers against claims arising against them, then the D&O insurance will reimburse the business.
• Management Liability Insurance, on the other hand, also covers claims made against the company itself and employment-related legal actions.

What Does Management Liability Insurance Cover?

1. Directors’ & Officers’ Liability

This covers individuals in leadership roles against claims such as:

• Breach of trust or duty
• Errors or misleading statements
• Defamation
• Negligence
• Insolvency or wrongful trading

Potential claimants include:

• Investors or shareholders
• HMRC
• Health & Safety Executive (HSE)
• Creditors
• Employees
• Competitors
• Regulatory bodies

Companies often choose to pay for claims made against their directors, and D&O cover helps protect the business’s financial health in doing so.

2. Corporate Legal Liability

This covers the company itself for criminal or unlawful acts, including:

• Workplace accidents (e.g., HSE investigations)
• Environmental pollution (e.g., breaches of environmental law)
• Copyright infringement (e.g., marketing disputes)

Corporate liability can arise from:

• Negligence
• Actions taken for company benefit
• Lack of proper management

Covered costs include:

• Legal defence and representation
• Investigation costs
• Court fees
• Settlements

3. Employment Practice Liability

This protects companies and managers against employment-related claims, such as:

• Unfair dismissal
• Discrimination or harassment
• Pay inequality
• Breach of employment contract
• Emotional stress caused at work

EPLI covers:

• Legal defence and representation
• Legal fees
• Compensation awards or settlements

Additional Areas of Cover

Depending on the insurer, MLI policies may also include:

• Crime loss cover
• Tax audit expense cover
• Pension trustee liability

Typical Exclusions

Management Liability Insurance does not cover:

• Deliberate illegal acts
• Claims covered by other policies
• Pre-policy claims
• Intentional non-compliance
• Property damage or bodily harm
• Fines and penalties
• Professional Negligence

Do You Need MLI?

While not legally required, MLI is increasingly seen as essential due to:

• The rising cost and frequency of litigation
• The shift from corporate to personal accountability
• Growing employee awareness of workplace rights

Without MLI, companies and their leaders may face devastating financial consequences. Some clients even require corporate liability insurance before doing business.

In short: Management Liability Insurance offers peace of mind, protecting your business and leadership team from unexpected legal threats.

Contact us today for further information on Management Liability and other insurance solutions.

Information provided by Lisa Langley, (Cert CII) Team Leader, Professional Risks, Cox Mahon Ltd.