What is Management Liability Insurance?

Management liability insurance is a type of business insurance that protects directors, officers and senior managers against personal claims arising from employment disputes, governance decisions and allegations of mismanagement. It is designed to cover legal defence costs and compensation where individuals are held personally liable, not just the business itself.

In the UK, management liability is commonly arranged as a bundled policy combining Directors & Officers (D&O), Employment Practices Liability (EPL) and Corporate/Company Legal Liability. The exact mix varies by insurer and underwriting appetite.

What Does Management Liability Insurance Cover?

A typical management liability policy is built around three core protections. Together, they help protect both the people running the organisation and (where applicable) the organisation itself.

1) Directors & Officers (D&O) Insurance

D&O insurance protects company directors and officers if they are personally accused of a wrongful act in the course of managing the organisation. This is the part of management liability most closely associated with “personal exposure” for leadership roles.

Legal defence costs for directors/officers (subject to policy terms)
Allegations of breach of duty, negligence, misstatement, misrepresentation or error of judgement
Claims brought by shareholders, investors, employees, regulators, competitors or other stakeholders

2) Employment Practices Liability (EPL)

EPL insurance helps protect the business and its leadership from claims brought by employees (or sometimes applicants) alleging breaches of their legal rights. In many UK SMEs, employment disputes are among the most common triggers for management claims.

Claims for unfair dismissal, wrongful termination or constructive dismissal
Allegations of discrimination, harassment or retaliation
Costs of defending employment tribunal claims (subject to policy terms)

3) Corporate/Company Legal Liability

While D&O focuses on individuals, company legal liability (sometimes called “entity cover”) can help protect the organisation itself when it is named in certain types of legal action connected to management decisions, governance or employment matters.

Claims made directly against the company (where the policy includes entity cover)
Selected legal costs and settlements/judgments (subject to policy terms)
Protection designed to reduce disruption and preserve financial stability during disputes

What Is Directors and Officers Insurance?

Directors and Officers (D&O) insurance protects company directors and officers against personal claims alleging wrongful acts in their leadership roles—such as breach of duty, mismanagement, misstatements or errors in judgement. D&O insurance is often the core component within a broader management liability policy.

Who Needs Management Liability Insurance?

Any organisation where people make decisions about staff, strategy, governance, reporting, finance or compliance can face management-related claims. This includes:

Limited companies (SMEs through to larger corporates)
Professional services firms (including partnerships and LLPs where applicable)
Charities, trusts and not-for-profits (trustees and decision-makers still face personal exposure)
Schools and academies (governors/trustees and senior leadership)
Businesses taking on investment, external funding or rapid growth (increased stakeholder scrutiny)

Put simply: if you have directors, partners, officers or senior managers, you have management liability exposure.

Common Claims Management Liability Insurance Can Help With

Management liability claims can be triggered by day-to-day leadership decisions. Examples include:

Employment tribunal claims following redundancies, disciplinaries, restructures or grievances
Allegations of breach of duty or mismanagement by directors/officers
Regulatory investigations or enquiries where governance decisions are questioned
Shareholder/investor disputes about reporting, strategy, funding rounds or disclosures
Claims arising from internal investigations, whistleblowing allegations or reputation events

Is Management Liability Insurance a Legal Requirement in the UK?

No—management liability insurance is not generally legally required. However, directors and officers can still be held personally liable for management decisions, and defending allegations can be expensive even if you ultimately do nothing wrong. Many organisations purchase management liability to protect leadership and reduce the financial shock of disputes.

Management Liability vs Professional Indemnity Insurance

These policies cover different risks and are often both relevant, depending on your business.

Management liability focuses on how the business is managed—employment practices, governance and leadership decisions.
Professional indemnity focuses on claims that arise from professional services or advice you provide to clients.

It’s common for professional firms to hold both—PI for client work exposures, and management liability to protect partners/directors from management-related claims.

How Much Does Management Liability Insurance Cost?

Costs vary by sector and risk profile. Premium is typically influenced by factors such as:

Company size, turnover and number of employees
Claims history and any known disputes
Management structure (e.g., number of directors/officers)
Industry risk, governance controls and HR procedures
Chosen limits, excess levels and any policy extensions

The most reliable way to benchmark cost is to quote based on your specific structure and exposure.

Frequently Asked Questions

Do I need management liability insurance for my business?

Management liability insurance is not usually legally required, but it is recommended where directors, partners or senior managers could face personal claims linked to employment disputes, governance decisions or mismanagement allegations.

What’s the difference between management liability and directors and officers (D&O) insurance?

D&O is typically a core part of a management liability policy. Management liability often bundles D&O with Employment Practices Liability and Company/Corporate Legal Liability for broader protection.

Is employment practices liability included in a management liability policy?

Often yes. Many management liability policies include Employment Practices Liability, though some insurers structure EPL separately or offer different limits and excesses depending on the business.

What types of claims does D&O insurance cover?

D&O insurance can cover allegations such as breach of duty, mismanagement, misstatements, negligence or errors in judgement made by directors or officers in their leadership roles, subject to the policy terms and exclusions.

Does management liability insurance protect personal assets?

It can. By covering legal defence costs and certain awards or settlements where directors are personally named, management liability reduces the likelihood of individuals paying from personal assets, subject to terms and exclusions.

Are regulatory investigations covered by management liability insurance?

Some policies include cover for defence costs connected to certain regulatory or administrative investigations. Coverage varies by insurer and wording, so it should be checked carefully.

Can claims be made against directors after they leave the company?

Yes. Claims can be brought later for decisions made during a director’s tenure. Many policies can cover past directors and may offer run-off options in specific circumstances, subject to terms.