CompareAll Business InsuranceCompare Business InsuranceOverseas Visitor CoverAll LoansCompare Loans
Management liability insurance covers the risks of running a business rather than doing its work: claims against directors and officers for how they managed the company, claims by employees such as unfair dismissal or harassment, investigations and prosecutions by regulators, and theft by employees or outsiders. It is designed for private companies and not-for-profits, and bundles several covers that large companies buy separately, starting with directors' and officers' (D&O) liability.
It fills the gap between the covers most businesses already know. Public liability deals with injury and property damage, professional indemnity with mistakes in your professional services. Neither responds when a former employee claims they were unfairly dismissed, when a regulator investigates a workplace incident, or when a bookkeeper quietly diverts funds.
By Better Rate Mate Editorial Team ยท Last reviewed
Policies are built from sections. You can often choose which to include and set a limit for each, or accept a single limit shared across the policy.
| Section | What it covers | Example |
|---|---|---|
| Directors and officers (D&O) | Claims against directors and officers personally for wrongful acts in managing the company, and the company's cost of indemnifying them | A shareholder or creditor alleges a director breached their duties |
| Company (entity) liability | Claims against the company itself for management wrongful acts | A supplier sues the company over a misleading statement in a tender |
| Employment practices | Claims by employees, former employees and job applicants | An unfair dismissal, discrimination, bullying or harassment claim |
| Statutory liability | Legal costs of investigations and prosecutions under laws such as workplace safety, environmental and privacy laws, and fines where insurable by law | A regulator investigates after a workplace injury |
| Crime | Theft of money or property by employees or third parties, including some electronic fraud | An employee diverts payments to their own account over two years |
| Tax audit (often optional) | Accountants' and advisers' fees to respond to a tax audit | The ATO reviews the business's GST returns |
Some liabilities can't be insured or indemnified at all, whatever the policy says, and management liability is where that line matters most.
The Corporations Act limits what a company can do for its officers. A company can't indemnify an officer against certain liabilities, such as a liability owed to the company itself or a pecuniary penalty order. It also can't pay the premium for insurance that covers an officer for liability arising from a wilful breach of duty to the company, or from improperly using their position or company information (sections 182 and 183), other than legal costs. A director can still buy that cover personally, but the company can't pay for it.
Work health and safety fines are the other big one. Under the model work health and safety laws, it is an offence to take out insurance that covers a WHS penalty, and a policy term that purports to cover one is void. Tasmania, for example, adopted the prohibition (sections 272A and 272B) in 2023. Policies can still pay the legal costs of defending a WHS investigation or prosecution, which is where the statutory liability section earns its place.
Any business that operates through a company has directors with legal duties. ASIC sums up the core of them: officeholders must act in the best interests of the company, in good faith and for a proper purpose. Directors can be personally liable when things go wrong, and not only in court: under the ATO's director penalty regime, directors can be made personally liable for some unpaid company PAYG withholding, GST and superannuation guarantee charge. Don't assume any policy covers those tax debts. The case for management liability grows with the number of people involved: employees (who can bring employment claims), investors and lenders (who can allege mismanagement), and regulators with an interest in what you do.
It is common for private companies with staff, for not-for-profit boards whose volunteer directors carry the same duties as paid ones, and for businesses preparing to raise capital or sell. A sole trader with no employees usually has little need for it, although crime and tax audit cover are sometimes available on their own.
Management liability is written on a claims-made basis, like professional indemnity. The policy that responds is the one in force when the claim is made against you and notified to the insurer, not the one in force when the conduct happened.
Two consequences follow. First, you have to tell the insurer about circumstances that might lead to a claim as soon as you become aware of them, during the policy period; a claim that arrives later is then treated as falling in that year. Second, if you let the policy lapse, a claim made after it ends is generally not covered, even if the conduct happened while it was running. When a director retires or the company is sold or wound up, ask about run-off cover, which keeps protection in place for claims made in later years about the past.
Line up quotes on these points before you look at price:
A package of covers for the risks of running a company: claims against directors and officers, employment practices claims, regulatory investigations and prosecutions, and theft by employees or third parties. It is aimed at private companies and not-for-profits.
D&O insurance covers directors and officers personally for claims about how they managed the company. Management liability includes D&O but adds cover for the company itself, employment practices claims, statutory liability and crime, which is why it suits smaller companies that don't buy each separately.
No law requires a private company to hold it. Investors, lenders and not-for-profit funders sometimes ask for D&O cover, and many people will only join a board if it is in place.
Usually, under the employment practices section, including the legal costs of defending the claim and any compensation awarded, up to the limit and after the excess. Check how the policy treats claims by casual staff and contractors.
No. Under the model work health and safety laws it is an offence to insure against a WHS penalty, and any policy term that covers one is void. Insurance can still pay the legal costs of defending the matter.
If the policy includes the crime section, yes, up to its limit. Check whether electronic funds transfer fraud and theft by outsiders are included, and how long after the theft you have to discover it.
This page explains how management liability insurance generally works. It is not legal or insurance advice. Directors' duties and the limits on indemnity and insurance are complex; speak to a lawyer and a licensed broker about your company's situation.
