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Management Liability Insurance...

Thanks to AIG Insurance

The potential scope of Management Liability is shown by these scenarios based on actual claims. Note that we have changed details to ensure confidentiality and that the examples are illustrative only and not to be relied on to justify coverage in any particular situation.

Occupational health and safety
In a prosecution by the Victorian Work Cover Authority a workplace death is held to be caused by an inadvertent accident. The company pleads guilty to charges of failing to provide a safe plant and system of work, training and supervision. Unusually for a death, the directors are not convicted. Defence costs exceed 6 figures.

Occupational health and safety
A golf club takes on a part-time worker to cut the rough alongside the first hole. Serious foot injuries are sustained when the worker alights from a ride on mower to retrieve 3 balls lying in the grass. An investigation finds breaches of workplace health and safety obligations and the Industrial Magistrate awards a 5 figure penalty.

Unfair dismissal
A pregnant employee is dismissed for non-attendance. The manager who dismissed her says he was not aware of her pregnancy ? although the company fails to reverse this decision when the employee produces confirmation from her G.P. The case is settled for a 5 figure sum.

Misconduct
An employee is dismissed after sending a stream of offensive emails to colleagues about one of his senior managers. However the employer failed to follow proper process in dismissing the employee and the case was settled for a 5 figure sum.

Discrimination
A female employee is made redundant. She complains her line manager constantly belittled and insulted her in front of colleagues with cutting remarks and offensive comments. The case is settled for a 4 figure sum.

Fraud by collusion with supplier
A trusted employee has authority to select suppliers for the company. He channels a large proportion of projects to one particular supplier in return for regular cash payments of several hundred dollars each month. The fraud is only discovered after 4 years and an anonymous tip off.

Fraud by a lone employee
An employee who processes invoices also has access to the supplier creation system. The employee sees that when invoices are approved for payment, the financial controller examines the largest payment in detail and then signs the rest. The employee creates a false supplier and makes many small payments totaling thousands of dollars over several months.

Insolvent trading
The directors of a company in financial distress appoint an administrator who subsequently puts the company into liquidation. The liquidator alleges the directors have allowed the company to trade while insolvent during the six months leading up to the administrator's appointment. Defence costs and the directors' personal liability have the potential to reach a 7 figure sum.

Personal liability, fines, banning orders
Directors defend regulatory action seeking fines and compensation as well as overturning banning orders disqualifying them from acting as a company director.

Environmental prosecution
Under the Environmental Protection Act, directors are liable for prosecution if their business is suspected of pollution damage. In one case, charges against a director went ahead ? even though the company had confirmed their tanks did not even hold the contaminant identified in an adjacent stream.

Fire Safety Regulations
Directors are prosecuted by local authority after consistently failing to comply with fire regulations. They claimed that the work required to their premises by the local authority was unnecessary. We defended the directors and eventually an acceptable solution was reached ? defence costs were 5 figures.

Intellectual property breach
Directors defended an action in the Federal Court alleging breach of IF rights and the Trade Practices Act in using a transport equipment company's designs for a purpose built industrial trailer without permission and acknowledgement of ownership. The action was for damages, a declaration, injunctive relief, surrender of designs and corrective advertising. Defence costs were 6 figures with a further 6 figure settlement.