Management Liability Insurance

What is Management Liability insurance?

Management Liability insurance protects individuals who run schools against claims that may be made against them both in their personal capacity and/or when acting collectively on behalf of the school.  The former is known as Governors’ and Trustees’ Liability (a variant on company Directors’ and Officers’ Liability), with the latter referred to as Entity Defence or Corporate Legal Liability.  

Not all policies provide both forms of protection, so best to check your policy to assess the cover provided.

Who is protected by the policy and what are the key features?

This insurance is primarily designed to provide defence costs when responding to claims made against governors’ or trustees’ or board members, senior managers, and employees, for alleged wrongdoing in their decision making which causes another party a financial loss or which are deemed to be uncompliant with rules, regulations, or statutes.  Any damages awarded would be reimbursed to the extent of the policy coverage in force.

Cover applies to the actions of past, present and future personnel, so long as a claim is brought whilst the policy remains active and covers the period relating to the allegation of wrongdoing.

The key areas of where allegations of wrongdoing can emanate from include breach of fiduciary and statutory duties, breach of trust, and various forms of negligence including alleged misstatements and misrepresentations.

Claims could be directed against individuals personally, or the school itself as a corporation, or both.  ‘See where the mud sticks’ can be a genuine strategy for claimants.  Individuals serve with unlimited liability; therefore, the governors’ and trustees’ element of cover is critical to safeguard personal assets.

Policy considerations

When reviewing your own insurance policy, you may want to consider the following key points:

• What is the policy limit?
• Is the limit on an any one claim basis, or all claims in the policy period?
• Does the cover have its own section of coverage, or is it combined with other coverages, known as Professional Liability (often a combination of Management Liability and Professional Indemnity).  Can this cover be identified?
• Does the policy restrict the activities of the past or known circumstances – this often applies when changing insurer and can be through a retroactive date or prior and pending litigation date

Potential claim situations

• The school receives a substantial donation for a particular purpose; however, the money is alleged to have been spent elsewhere resulting in a claim for misappropriation of funds
• A grounds employee suffers a fatality whilst working for the school.  The HSE investigated and Corporate Manslaughter charges are brought against the member of staff responsible for Health and Safety, alleging they breached Health and Safety Legislation, contributing to the fatality
• A school was being purchased by another school; however, the acquiring company sued the Directors of the target company citing alleged negligent misrepresentation as to their financial standing

Should you wish to know more about this cover we would welcome hearing from you.