SMEs Exposed: The Increasing Importance of Management Liability Insurance

As more and more SMEs across the country are facing litigation, Management Liability Insurance is fast becoming a must-have for Australian businesses.

Corporate Litigation is a significant risk exposure for today’s business owner, however the uptake of insurance cover for this risk is relatively low, with under 30% of Australian Businesses opting for the cover [Insurance Business Online, 2015].

According to Chris Stallard of Vero (a major Australian insurer), the lack of uptake in Management Liability Insurance is due to the market perception that this particular insurance product is only relevant to bigger firms. This assumption is inaccurate as all business small and large have found themselves subject to litigation in recent years.

The last ten years has seen an increase in the number of claims arising from shareholders, clients, creditors, competitors and regulatory bodies. With this in mind, the size of the business isn’t necessarily a deciding factor in whether a claim is likely or not, rather in the business’ interactions with internal and external stakeholders. As no business operates in isolation, there is always the potential risk of a liability claim.

Just like Property, Fire and Business Interruption; Management Liability should be a serious consideration for any Business Insurance policy. The most common types of claims that fall under Management Liability Insurance relate to breaches of Director’s duties, or false, misleading and deceptive conduct by Directors and Officers. In the event that such a case is brought against your company, the legal costs to defend allegations alone can be financially crippling.

Management Liability Insurance protects the Directors and Officers of a business, and the corporation itself in certain cases against the risks and exposures of running the business. A typical policy may cover:

  • Representation costs where a Director or Officer is legally required to attend an inquiry or investigation relating to the affairs of the corporation
  • Legal costs & expenses in the defence and investigation of a Directors & Officers claim
  • Any compensation required to be paid by the insured in order to dispose of a Directors & Officers claim

Speak to us about whether Management Liability Insurance may be an appropriate cover for your business to consider.


Conditions apply for each policy and the information expected from you for a policy to trigger. Coverage may differ based on specific clauses in individual policies. Please ask your broker to explain the additional benefits and exclusions pertaining to your policy.

The information provided is general advice only and does not take account of your personal circumstances or needs. Please refer to our financial services guide which contains details of our services and how we are remunerated.