Management Liability Insurance: Protecting your Directors and Officers

It is increasingly becoming a litigious society, claims of wrongdoing are on the rise, and customers, shareholders, investors, and even other employees seek to hold people accountable for mistakes and problems. Even regulators could involve civil, criminal, or regulatory proceedings.

If legal proceedings take place, they can ultimately set companies back by hundreds of thousands, or even millions, and if a senior member of staff finds themselves the target of a claim, they could have to finance the legal proceedings out of their own pocket.

As the litigation culture continues to rise, if you don’t have management liability insurance (which includes and is also traditionally known as Directors and Officers insurance) it would be worth considering and investing to protect your senior management and we aim to explain why in the remainder of this article.

What is management liability insurance?

Management liability insurance covers the cost of compensation claims against directors, partners, officers, and key managers. Due to the nature of their roles, these positions have greater responsibility which does place them at higher risk for claims for alleged wrongful acts.

A policy can also cover any legal costs that arise for directors in defending their case and extends to include company legal liability and employment practices liability.

What is a wrongful act?

Wrongful acts as set out by the Association of British Insurers (ABI) include:

Breach of trust

Breach of duty



Misleading Statements

Wrongful trading

As we know mistakes do happen.  But, please be aware, If a director, officer, partner, or key manager acted in good faith and did not mean to commit a wrongful act it could still trigger a claim.

How does Management Liability Insurance protect you?

It combines three key areas of risk in a single policy, Management Liability insurance pays your defence costs and any final settlement or compensation awarded following legal action against you or your company.

The policy covers a wide range of claims and employment disputes, from wrongful trading and breaches of tax regulations to sexual harassment and corporate manslaughter.

Anybody can raise a claim against a director personally – parties that regularly pursue include:

Investors or Shareholders – misguiding or withholding information

HMRC – tax reporting

HSE -negligence with the threat to employee or public safety

Creditors – financial loss

Employees – injury, pension payments, training

Competitors – defamation

Regulatory bodies – finance regulations

Police – fraud

Please do not hesitate to contact the Riskworks Team on 01625 547754 or email