Running a company comes with a risk that many directors and officers don't fully appreciate: if something goes wrong, personal liability can follow you beyond the business itself.
Directors, officers and managers can be held personally liable for decisions made on behalf of their company, meaning their personal assets and reputation can be at risk if action is taken against them by an employee.
Management liability insurance is designed to protect against this, offering much-needed cover and peace of mind to both the individuals in leadership roles and your business itself.
What is management liability insurance?
Management liability insurance is a business insurance package that protects company directors, officers and managers from a range of costs stemming from allegations of wrongful acts and misconduct. Some of these potential allegations can include:
- Breaches of OH&S
- Breaches of statutory duty
- Defamation
- Sexual assault
- Unfair dismissal
Cover is typically available from $1 million to $5 million with this type of coverage, which can be adjusted to suit your business’ and directors’ specific risk profiles.
What does management liability insurance cover?
Depending on the components included in your policy, management liability insurance can cover:
- Legal defence costs
- Settlements and court-ordered damages
- Investigation costs
- Civil fines and penalties (where legally permissible)
- Employee compensation claims
Management liability insurance is typically made up of five core components, which can be taken out as a package or selected individually depending on your business's risk profile:
Directors and officers (D&O) liability
D&O cover protects individual directors and officers against personal liability for wrongful acts carried out in their management capacity. Director liability can be personal and unlimited, meaning a claim can reach a director's own assets, not just the company's. D&O cover is designed to protect against exactly this scenario.
Corporate liability
Corporate liability covers the business entity itself, as distinct from its individual directors and officers, against claims arising from its management and operations. This can include allegations of misleading conduct, breach of contract in a management context, and other claims brought against the company rather than its individual representatives.
Employment practices liability (EPL)
EPL covers the business against claims brought by current, former or prospective employees. This can include unfair dismissal, workplace discrimination, sexual harassment, bullying and failure to promote. These are among the most commonly claimed components of management liability insurance for Australian SMEs.
Statutory liability
Statutory liability cover pays for legal defence costs and certain fines and penalties arising from breaches of legislation. This includes workplace health and safety Acts, environmental laws and consumer protection legislation. Intentional breaches and criminal conduct are excluded from cover under all policies.
Crime and fidelity
Crime cover protects the business against financial losses caused by employee dishonesty, fraud or embezzlement. Some policies extend this to cover losses arising from external fraud as well, though the scope varies between insurers.
What isn’t covered by management liability insurance?
While specific exclusions depend on your insurer, the following are commonly excluded from management liability cover:
- Intentional or criminal acts: claims arising from deliberate misconduct, fraud committed by the insured or criminal conduct are excluded from cover.
- Known prior claims: any claims or circumstances the policyholder was aware of before taking out the policy will typically be excluded as a pre-existing matter.
- Criminal fines and penalties: while some civil fines and penalties are insurable, criminal fines and penalties imposed by government agencies generally aren’t.
- Unpaid superannuation and tax obligations: directors can be held personally liable for unpaid super contributions and certain tax debts, but these obligations aren’t covered by your insurance.
- Insolvency-related claims: claims arising from the insolvency or financial failure of the business are excluded, particularly where the director's conduct contributed to the insolvency.
- Bodily injury and property damage: physical injury to people or damage to property is the domain of public liability insurance, not management liability cover.
Always read the Product Disclosure Statement (PDS) carefully before taking out cover, as policy terms can vary. If you're unsure whether a specific risk is covered, check with your insurer or broker directly.
How much does management liability insurance cost?
According to BizCover, the average monthly premium for management liability insurance is $112, based on customer data from July 2024 to June 2025. However, you can see how much they can vary between industries in the following table of average premiums through BizCover:
| Industry | Ave. monthly ML premium |
|---|---|
| General practice | $58 |
| High school operation | $89 |
| Real estate agency | $91 |
| IT services | $95 |
| Marketing consultancy | $106 |
| Accounting service | $110 |
| Property development (house construction) | $128 |
| Savings bank operation | $139 |
| Lawyers/solicitors | $146 |
| Clothing retailing | $152 |
| Average premiums obtained via BizCover historical data on 28 April 2026. | |
As with most business insurance products, though, the cost varies depending on a range of factors specific to your business:
- Business size and turnover: larger businesses with more employees and higher revenue generally attract higher premiums, as they carry greater exposure across all components of the policy.
- Industry and risk profile: different businesses will pay different premiums based on the industry they’re operating in. As the table above shows, you’re likely to pay less as a GP compared to a lawyer.
- Components selected: taking out all five components of a management liability policy will cost more. If one of these sections doesn’t offer enough value based on the level of risk posed to your business, you may consider dropping it if you’re looking to reduce your premium.
- Cover limit chosen: policies are available from $1 million to $5 million. A higher limit provides greater protection but increases the cost accordingly.
Who needs management liability insurance?
In short, any business with a director and at least one employee has meaningful exposure to risks that management liability insurance can cover. Here are some situations where cover may be needed:
- Any business with employees: unfair dismissal and workplace harassment claims can be filed against any employer, regardless of size. The cost of defending even a meritless claim can run into the tens of thousands in legal fees before any settlement is reached.
- Any business with a director: directors of private companies, not just publicly listed ones, can be personally sued for decisions made in their management role. Personal liability isn't limited to large corporate enterprises.
- Businesses in regulated industries: construction, financial services, healthcare and food businesses face heightened statutory liability exposure, as legislative breaches in these sectors are more likely to attract regulatory attention.
- Not-for-profit organisations: directors of charities and incorporated associations face the same personal liability as company directors, often without the institutional support and resources that larger commercial entities have in place.
Case study: management liability insurance in practice
Sarah runs a marketing agency with 12 employees in Queensland. During a business restructure, she makes a long-serving account manager redundant. Several weeks later, the former employee lodges an unfair dismissal claim with the Fair Work Commission, alleging that the redundancy process was flawed and that the real reason for the dismissal was pregnancy discrimination.
Sarah engages an employment lawyer to respond to the claim. Over the following three months, the lawyer prepares a formal response, attends Fair Work Commission conciliation conferences and negotiates a settlement with the former employee. The total legal costs come to $18,500, with a settlement of $12,000 reached to resolve the matter without proceeding to a full hearing.
She holds a management liability insurance policy that includes EPL cover. Her insurer covers both the legal costs and the settlement, minus her excess. Without the policy, Sarah would’ve faced over $30,000 in combined costs at a time when the agency was already managing the financial pressures of a restructure.
