The ticking time bomb

We've been discussing Management Liability alot this year and for a very important reason.

Look let's be honest Management Liability (ML) is just a title and to you would mean very little. To break it down though it is basically the goalkeeper for your business. It is NOT used as a substitute to compliance and correct practices but a full stop on your business protection.

In business there are potentially thousands of individual pieces of legislation that have an impact on your business. We challenge you to name them all! We don't know them all and we too have to comply with them. Depending on your industry you may have as little as 50 for example, but still, even if 50 compared to 1,000 do you know them all? Over the past decade Australia has become a red tape nation. There is more red tape to cut through to run a small business then at any other time in our nations history. Non compliance on one piece of legislation can potentially ruin a business.

The Insurance industry is always evolving and finding new products to protect the community. It's what the industry has been doing for centuries and continues to today. (In spite of what some sensationalist media may think) When the growing burden of legislation on business became apparent the industry devised a product to fill an important gap. To run a business you need to comply with the following as an example;

* Human Resource acts
* Environmental acts
* Workplace Health and Safety Acts
* Fire Standards
* Employment Acts
* Trade Practices Act
* Acts under ACCC & ASIC if applicable.

This is just a snapshot of some of the acts you need to work under everyday. Just to open the door there is an act in place. They are forever evolving so it is important you are aware of what is relevant for your industry. How do you find out? Well your local Chamber of Commerce is a great place to start or Fair Trading in your relevant State. As a final consideration have your solicitor run over the requirements and ensure you have all your policies and procedures in place.

But who follows the policies huh? In your office you may have a HR manual, an OH & S manual, an induction manual, harassment policy and so on so. It is paramount that all employees know where to find the relevant policies and are reviewing them at least annually. This alone is a piece of legislation you must follow. Company policies are not just stuck ion a shelf in-case an audit is done, they need to be accessible, relevant and accountable. They also must evolve with your business. Consider when you had to create an email policy, well this should now be reviewed and broadened to encompass social media.

We could go into any number of Case Studies and we are happy to provide some if you would like to further consider but let's get back to our goal keeper. ML is a policy created as a back stop if an issue gets through your policies and procedures. What if an employee claims wrongful dismissal. How would you handle it. Well you would have to go through the dismissal policy and ensure you are ticking off all relevant steps. So what if you do this and the disgruntled ex employee turns around and sues you? Bugger I followed all the procedures and now this so and so is suing for loss of income and costs. This is exactly where Management Liability triggers. The Goalkeeper!  If the defense line is breached and someone is running into goal to take your business down, the Goalie is Management Liability.

ML is a policy designed to protect you against innocent breaches of an Act. A breach could be as simple as something we personally had recently in our own office where we hadn't upgraded the Fire Extinguishers. Yes we had a spot audit by Fire Safety officers and they picked up on the breach. We got away with immediate rectification which cost us $220 but it's proof that WH & S officers are out and targeting small business. We'll give you one example of a real claim that occurred and was covered by Management Liability.

This company had an ML policy in place.

The Insured was a small family owned company performing finishing work for garments for fashion manufacturers. The Managing Director of the Insured company was advised by the supervisor that one of the employees had stolen some garments. The MD accused that employee of theft and told her to leave immediately. On her way home, the employee consulted an employment lawyer who initiated proceedings against the company for unfair dismissal and in Australian Industrial Relations Commission. The Wrongful dismissal claim was defended and lost by the company. NO theft was found to against the employee. (Meaning no checks and balances done before dismissing) The employee was reinstated to her employment with the company with full back pay of $9,000 plus costs of $15,000. However the company's legal coats (including barrister fees) came to $64,000! That's a total loss of $79,000!! Lucky this company had a Management Liability policy in place. However if following correct procedures this whole scenario may have been avoided.

See how easy things can go wrong? A ML policy in your business is of paramount importance! They start from as little as $750 within a business pack (If your insurer can offer) or for broader cover we can source from $1,500 upwards depending on various risk factors and your own business / industry.

Seriously, think about it. For less then $2,000 you can protect yourself from defense costs and fines that could cripple your business. If you want to know more please contact us about ways to protect your business.

**Information within is of a General nature only. Aside from the case study sourced via DUAL Australia no individual person or companies situation has been considered. Please discuss your own personal needs with your adviser.