Management Liability2017-02-16T06:22:21+00:00

MANAGEMENT LIABILITY

Why do companies require Management Liability?

Employees, former employees and third parties can sue officers and directors for discrimination, harassment, and employment practices. Investors, customers, clients, government regulators & competitors can instigate legal actions against Directors & Officers for their actions or decisions.

Trusted employees can embezzle funds, steal stock or commit fraud.

Government and regulatory authorities can impose fines upon the company for breaches of statutory requirements.

Employees can be kidnapped whilst traveling overseas, or the company can have suffer extortion by threatening its employees or products.

The company can be sued for copyright infringement or defamation over content contained on its websites or social media accounts.

The risk

Coverage should include:

• Directors and Officers Liability cover

• Employment Practices Liability cover

• Trustees Liability cover

• Crime cover

• Statutory Liability cover

• Kidnap, Ransom and Extortion cover

• Internet Liability cover

Directors & Officers claims examples:

Defamatory eMail Contents

Coverage Section – Directors and Officers Liability

Claim – Defamation

A senior employee of a civil construction company sent an email to a number of staff  members which contained statements about two of their suppliers which could be perceived as defamatory. The suppliers found out about the email and commenced proceedings against the author of the email.

The matter resolved at mediation with a payment of $60,000. In addition, Defence Costs of $57,390 were incurred.

Workplace Health & Safety Claim

Coverage Section – Directors and Officers Liability

Claim – Work Health & Safety Claim

An employee of an excavation company was fatally injured after accidentally digging into electrical cabling. WorkCover investigated the circumstances surrounding the fatality and the Office of Public Prosecution served a Charge Sheet and Summons on the excavation company, alleging the company had breached various sections of the Work Health and Safety Act.

The organisation vigorously defended the action for three years and the Office of Public Prosecution subsequently discontinued the matter; however Defence Costs of $343,000 were incurred.

Tax Audit

Coverage Section – Directors and Officers Liability

Claim – Tax Audit

A used car dealership received a notice from the Australian Taxation Office (the ATO) notifying them that it was to undertake an audit of its records to determine whether or not the Dealership had met its taxation obligations for a specific period of time. The ATO requested that the Dealership provide completed statements to the ATO.

In the event that the Dealership was to be found not to have contributed sufficient tax, it would have been liable to pay a penalty. Consequently, the Dealership appointed a firm of accountants to respond to the audit.

Cover was granted to the Dealership in respect of the audit on the basis that the organisation had Tax Audit Expenses available to it. Accordingly, an amount of $11,000 was paid being the cost of the audit.

Statutory Liability claims examples:

Breach of Liquor Licensing Legislation

Coverage Section – Statutory Liability

Claim – Liquor Licensing Legislation

A licensee of a bar received a complaint from the police alleging it had failed to properly manage the premises in accordance with the legislation and properly preserve the safety, health and welfare of patrons, resulting in the licensee being liable to pay a penalty.

The matter was resolved by the licensee agreeing to conditions being placed on its license in lieu of a penalty and $28,000 of Defence Costs were incurred.

Construction Company Fails to Meet Standards

Coverage Section – Statutory Liability

Claim – Work Health & Safety

A construction company faced allegations that it had failed to ensure that employees of sub-contractors were not placed at risk of injury from the use of a mobile crane, in breach of the Work Health and Safety Act. The construction company was investigated by the relevant authorities and a claim was led.

The construction company incurred a fine of $100,000 and defence costs of $150,000..

Death of Construction Employee

Coverage Section – Statutory Liability

Claim – Negligence

A commercial construction company was investigated following the death of an employee, who had fallen from the eighth oor due to not wearing a safety harness. The investigation established that the employee’s death would have been prevented if he had been wearing a safety harness as required by law.

The construction company was fined $110,000 for failing to keep a safe work environment and incurred legal costs of $34,000.

Employment Practices Liability claims examples

Harassed Office Employee

Coverage Section – Employment Practices Liability

Claim – Harassment

An employee had been employed by a glassware company for the past four years. Over the past twelve months,
the employee had been harassed by another employee, who had been constantly calling her names, taking her printing and keeping a log of her work schedule. The employee complained to the manager on a weekly basis; however the other employee’s behaviour was not addressed. Proceedings for harassment were brought against both the employee and manager for failing to address allegations raised on numerous occasions.

The case settled for $57,000 and defence costs of $23,000 were incurred.

Employee’s Negative Social Media Comments

Coverage Section – Employment Practices Liability

Claim – Unfair Dismissal

An employee of a transport company wrote numerous negative comments about the company and his fellow employees on a social media site. The employee was dismissed without notice when the company was notified of the comments made. In response, the employee commenced Unfair Dismissal proceedings with the Fair Work Commission.

The case settled for $26,000 and incurred defence costs of $17,000.

Inappropriate Interview

Coverage Section – Employment Practices Liability

Claim – Harassment Claim by potential employee

A recruitment consultant was interviewing a potential employee when he made unwelcomed sexual advances towards the interviewee and suggested the exchange of sexual favours to secure the job. The interviewee issued a written demand for $20,000 damages and requested the recruitment consultant be sacked.

The case settled for $15,000 and defence costs of $9,500 were incurred.

Unfair Dismissal

Coverage Section – Employment Practices Liability

Claim – Unfair Dismissal

A bus driver’s employment was terminated by the bus company due to a serious road accident and a number of complaints from the members of public relating to his driving and conduct. The bus driver lodged an application with the Fair Work Commission alleging that his dismissal was unfair and he was not afforded procedural fairness by his employer.

The matter was resolved at conciliation on favourable terms to the bus company on the basis that the bus driver would be allowed to resign from employment. No money or other benefit was provided to the bus driver. The bus company’s Defence Costs were $33,000.

General Protections

Coverage Section – Employment Practices Liability

Claim – Redundancy

An Accounts Manager had been employed by an IT company for 9 years when he was advised that his position was being made redundant. The Accounts Manager believed that his redundancy by the IT company was unfair, and led a claim with the Fair Work Commission alleging adverse action by the IT company. The Accounts Manager believed that he was made redundant because he had exercised his workplace right to make a complaint and his workplace right to take personal leave.

The matter settled at conciliation on a commercial basis. The IT company’s defence and settlement costs exceeded $50,000.

Disability Discrimination

Coverage Section – Employment Practices Liability

Claim – Discrimination

The claimant was an employee of a food packaging company. She alleged she was victimised and discriminated against
by the food packaging company on the basis of her having a physical disability. The claimant lodged a complaint with the Australian Human Rights Commission.

The matter was settled on a commercial basis. The employer’s defence and settlement costs came to more than $80,000.

Racial Discrimination

Coverage Section – Employment Practices Liability

Claim – Discrimination

An employee is of Aboriginal descent, and had been employed as a receptionist in a consulting firm for over a year. Before their resignation the employee had a meeting with their manager who asked the employee to refrain from using the word “you’se” during her dealings with clients and stake holders. The employee believed they were vilified and discriminated on the ground of their race, and led an application with the Australian Human Rights Commission. The matter proceeded to conciliation. The employee sought $40,000 as compensation.

The company rejected the offer and eventually the matter was then settled for $15,000. Defence Costs of $25,000 were incurred

Crime Cover claims examples

Sales on the Side

Coverage Section – Crime

Claim – Employee Theft

A delivery driver for a flour mill entered into arrangements with customers of the mill to sell them flour at a discounted rate of half the price the mill was offering. The delivery driver edited his logbook so the additional pallets of flour he delivered were not noticed. The driver continued his scheme until a dissatisfied customer advised the company of the arrangements in place.

The company implemented an investigation, which determined the delivery driver had taken approximately $450,000 worth of flour. The driver was charged and the investigation process cost the company $60,000.

Excess Wage Payments

Coverage Section – Crime

Claim – Employee Theft

A company’s bookkeeper was responsible for the payment of wages and superannuation to employees. During their employment, the bookkeeper made additional, duplicate payments to their personal bank account while underpaying other employees. The loss was not discovered until after the bookkeeper had passed away, and a new employee commenced work in that position.

The company implemented a financial audit, which determined the loss to be nearly $75,000. The audit costs amounted to $28,000.

Stock Theft

Coverage Section – Crime

Claim – Employee Theft

A large air-conditioning manufacturer discovered it could not account for stock transferred from its manufacturing plant to its sales warehouse. The company asked its branch manager to investigate the stock leakage. The manager failed to identify the issues while the losses appeared to increase. The manager abruptly resigned. The company discovered that the manager had stolen stock worth $500,000.

The air-conditioning manufacturer engaged an external investigator who confirmed the $500,000 figure. The manufacturer sought to recover its losses; however the employee had already disposed of the goods and the funds arising from their sale.

Payroll Fraud

Coverage Section – Crime

Claim – Employee Theft

A company employed migrant workers on student visas to run sporting camps for schools. The workers were limited
to how many hours they could work per week under the visa terms. The company was contacted by a school which had been issued an invoice for services which had not been performed. The manager responsible for booking camps for schools confessed he had been paying himself and certain staff  cash bonuses by altering company payroll and over-billing the client schools. Over a five year period the loss totalled $230,000.

The company was not able to recover any of the funds from the employee, who had sent all of the funds offshore to another bank account. An audit of accounts was undertaken which confirmed the loss equalled $230,000

John has had my utmost respect and confidence when it comes to any insurance matters relating to my business…we had a major flood in the shop. John arrived almost immediately to take full control. We were able to relocate our business overnight and continue trading the next day. I would recommend John without any hesitation

Peter Wynn, Rugby league legend and owner of Peter Wynn's Score Sports Store

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