In addition to the typical liability exposures faced by most organizations for bodily injury or property damage, there are significant exposures to risks that are generally excluded from a General Liability policy. These exposures fall into a category known as Management Liability.
Management Liability exposures involve claims brought against your employees, directors, officers, trustees, or your corporation for “wrongful acts” based on an error, negligent act or omission, or misstatement or misleading statement. Coverage to provide protection for this exposure is found within the following policies:
Corporations and not-for-profit organizations must provide financial protection for the costs of legal actions that may be brought against their Boards of Directors and management teams. In many cases, corporate indemnification may not provide complete protection for these directors and officers.
Additionally, the corporation may wish to protect its own assets in the event of a lawsuit. Therefore, many firms purchase a Directors’ & Officers’ Liability Policy to cover the cost of the indemnification provided by the corporation or to pay claims on behalf of the directors and officers when the corporation is not providing indemnification.
At William H. Connolly & Co., LLC we pride ourselves in understanding the coverages provided by each policy and more importantly, the exclusions that exist in these policies. Understanding the exclusions allows us to either request removal of these exclusions or provide coverage enhancements to assure our clients that they are fully protected.
Examples of enhancements to broaden the scope of the coverage include, but are not limited to the following:
- Entity Coverage
- Presumptive Indemnification
- Conduct Exclusions Amendment
- Contractual Liability Exclusion Amendment
- Governmental Investigation Amendment
- Wage Exclusion Amendment
- Fines or Penalties Exclusion Amendment
- Captive Insurance Company Exclusion Amendment
- Insured vs. Insured Exclusion
- "Prior Acts" Coverage
Discrimination, wrongful termination and sexual harassment are prominent among litigated employment practices. Employers are being held to higher standards under numerous employment laws such as the Civil Rights Act of 1991, the Americans with Disabilities Act or the New Jersey Law Against Discrimination. The interpretation of Employment Law by state and federal courts has expanded both the frequency and severity of employment claims.
Insurance is available to defray the cost incurred in defending Employment Practices claims by business owners and institutions and to pay for damages resulting from those claims. The cost of defending cases, the size of settlements and the unpredictability of having a case go to a jury trial all contribute to the increasing need for Employment Practices Liability insurance.
Employment Practices Liability policies may differ significantly from one insurance company to another. Different companies offer different coverages and deductibles can vary.
Among important coverage issues are:
- Although Employment Practices Liability insurance typically provides coverage for claims brought by employees against other employees or management, third party coverage is also available for claims brought by customers, vendors or outsiders... those other than employees.
- Coverage is available for all "prior acts" instead of insurance restricted to occurrences that take place after a designated date (retroactive date).
- Some policies offer the ability to choose your own attorney or to have input in the selection of counsel when defending an Employment Practices Liability insurance claim. As more insurers enter the Employment Practices Liability insurance marketplace, various value-added services are being offered, including:
- Audits of employment practices including review of handbook, supervisor training, dispute resolution
- Toll free consultation services, providing insureds with access to Employment Practices experts, usually attorneys, on employment matters
- Sample documents such as handbooks, which have been developed to comply with Employment Practices Liability insurance laws and regulations
- Training and information, such as newsletters and web sites, to help employers study current Employment Practices Liability insurance issues
William H. Connolly & Co., LLC advises businesses and institutions on the insurance implications of various employment practices issues including:
- Quid Pro Quo
- Hostile Work Environment
- Sexual Harassment
- Wrongful Termination
- Grievance Procedures
- Employee Handbook
- Federal and state agencies and legislation regarding employment discrimination:
- Equal Opportunity Employment Commission (EEOC)
- Americans With Disabilities Act (ADA)
- New Jersey Law Against Discrimination (NJLAD)
- Title VII of the Civil Rights Act of 1964
If you are an employer, owner, or officer who makes decisions about your company’s 401(k) plan or other qualified employee benefit plans, odds are your personal assets are at risk. Under the Employment Retirement Income Security Act of 1974 (ERISA), fiduciaries can be held personally liable for losses to a benefit plan incurred as a result of their alleged errors, omissions, or breach of their fiduciary duties.
Fiduciary Liability Insurance covers the legal liability which arises from claims for alleged failure to prudently act within the meaning of the Pension Reform Act of 1974.
When purchasing coverage, it is important to evaluate the following:
- What actions and costs are covered?
- What is the definition of Wrongful Act?
- How are Damages defined?
Fiduciary Liability coverage, though not required by ERISA, is common coverage used to avoid personal liability, mitigate the loss of corporate assets, provide protection in the event of merger or acquisition, and to avoid loss of plan assets.
These coverages can usually be connected or "bundled" with other coverages to create an executive package program.
Other coverages often included within a program include:
- Kidnap & Ransom
- Crisis Management
To establish a level of confidence that your personal and corporate liability exposures are being properly protected, please allow us the opportunity to evaluate your current Management Liability Program.