Owning and running a Strata Management firm carries with it significant responsibility and risk. Wrongful acts by directors, dishonest acts by employees, harassment, wrongful dismissal and statutory fines and penalties are just a few exposures that can threaten the financial sustainability of your business.
Management Liability Insurance is designed to respond to risks of this nature, providing financial protection for your business and personal assets.
What is Management Liability Insurance?
Management Liability Insurance is designed to protect businesses and their key staff members against the risks associated with running and/or managing a business.
The type and extent of Management Liability Insurance cover can be tailored to meet the needs specific to your business.
Who needs Management Liability Insurance?
You should seriously consider taking out Management Liability Insurance for your business if you are a Strata Management firm company owner, director or senior manager.
What are some common exposures where Management Liability is designed to respond and protect your business?
A Management Liability Insurance policy can ensure your Strata Management company has a strong safety net in place to help prevent such events (actual or alleged) from impacting your bottom line and/or your personal assets.
- Wrongful acts by Directors and Officers (alleged or actual)
- Dishonest acts by employees e.g. fraud, theft
- Claims made by employees resulting from employment practices – Harassment, bullying, wrongful dismissal etc. (actual or alleged)
- Statutory fines and penalties
- Tax Audit Costs
What are the benefits of Management Liability Insurance?
With authorities actively pursuing businesses that breach safety standards, statutory law and fail to show due diligence, an insurance program without Management Liability could leave you and your business seriously exposed to a large financial loss as a result of legal expenses or statutory fines and penalties.
- Provide protection for your business and personal assets against an unexpected claim;
- Ensure that your cash flow is unaffected by losses or liabilities associated with an insured event;
- Provide you with cover for the legal resources needed to defend against an unexpected claim, and;
- Protect you against both personal and corporate liabilities from numerous stakeholders including: employees, competitors, creditors, regulators, customers, liquidators/administrators and shareholders.
How are Strata Managers at risk?
A Strata Management firm, like any other business, may face a number of exposures that can threaten company profitability and the personal assets of directors.
Below we have provided some claim scenarios to illustrate the importance of a Management Liability policy in protecting the continuity of your business.
Management Liability Claim Scenarios
1. Wrongful Termination
An employee in a large organisation was terminated on the basis that the position was made redundant. The ex-employee issued proceedings in the Human Rights Commission alleging wrongful termination on the basis that another individual was then promoted into that same position, and the former role was not actually redundant.
The ex-employee was able to prove wrongful termination, and accordingly, the Commission ordered the employer to reinstate the employee and pay over $60,000 in damages and related costs.
Management Liability Insurance responded to indemnify the costs associated with this claim.
2. Unfair Competition
The director of a medium sized business left and started up a new business. The individual was subsequently sued by the directors of the former business. The directors in the former business alleged breaches of intellectual property and plagiarism regarding the way in which the individual was marketing his new company. The former business issued proceedings in the Federal Court seeking damages in excess of $1 million.
As the claim was made against the Insured Person, it was determined that the Management Liability Policy was triggered, and indemnity for the claim was extended to the Insured. The claim was settled via mediation, with the defendant director agreeing to pay over $300,000 in damages. The legal costs incurred were in excess of $150,000.
Management Liability Insurance responded to cover the costs associated with this claim.
Without the support of Management Liability Insurance, many Strata Management companies may not be able to afford the legal costs, or fines and penalties imposed in a claim, while still maintaining the financial viability to continue operating as a company. In dire cases, if a business entity cannot pay the claim, the personal assets of directors may be sought as an avenue for debt recovery.
Evidently, Management Liability is not only important for your business, but also to protect the personal assets you’ve worked so hard to acquire over many years.
Which acts could Management Liability Insurance protect your company against in Australia?
There are 14 acts that companies must comply with:
- The Corporations Act 2001
- Competition and Consumer Act 2010
- The Income Tax Assessment Act 1997
- A New Tax System (Goods and Services Tax) Act 1999
- Privacy and Data Protection Act
- Age Discrimination Act 2004
- Disability Discrimination Act 1992
- Human Rights and Equal Opportunity Commission Act 1986
- Racial Discrimination Act 1975
- Sex Discrimination Act 1984
- Workplace Relations Amendment Act 2008
- Work Health and Safety Act, 2011
- Workplace Relations Act 1996
- Workplace Relations Regulations 2006
Source: ‘It May Happen To Me! The Essential Guide to General Insurance’ by Dr Allan Manning
For more information on Management Liability Insurance, or to request a quotation designed to address the risk exposures inherent in your Strata Management business, please contact your Resolute Insurance Adviser, Ph. 1300 668 033 or via email, firstname.lastname@example.org.
This insight article is not intended to be personal advice and you should not rely on it as a substitute for any form of personal advice. Please contact Resolute Property Protect ABN 53 157 850 827 Licence Number: 425 966 for further information, or refer to our website.