Have you ever wondered how companies make decisions? You might have heard of Management liability. It is the term that covers each & every insurance policy designed to protect directors & officers of an organization.

This blog article will break down the job of directors and officers and board members, their role in decision making, and what is expected of them once they are in that position.

What Are Directors and Officers Liability Insurance?

A director or officer or board member can be sued by shareholders, employees, customers, and/or other parties who feel that the company has suffered some damage due to their actions.

Management Liability Insurance NJ is meant to protect such people from these false claims. It is also useful in protecting the company in the event of a lawsuit.

How Should People Be Protected From Liability Claims?

Directors are the highest ranking officers of a corporation, and should be protected from liability claims. Directors should only pay for their own legal defense should there be any legal claims against them.

Ordinary directors should not be legally required to pay for the defense of other directors or officers, or other people on the board.

Likewise, other people on the board cannot use the director's personal funds to cover their legal defense.

What Does Management Liability Protect Against?

Management liability covers management actions against both the company and the employees. However, different types of liability insurance cover two separate areas:

1. Management liability
2. Employment liability

The main difference is that the former is generally structured to cover the managers of an organization, whereas the latter tends to protect employees. Such claims can be made by customers of the company, its employees or competitors.

Employment liability coverage protects employees from claims for injuries to persons and property. This type of insurance is normally linked with workers compensation, which provides protection for the employee in the event of an accident at work.

Advantages of Management Liability Insurance

The policy protects the directors, business owners and senior management of a company against any errors or omissions which could land them with legal problems or disputes. This includes financial and even product liability.

Here are some of the key benefits:

● Wrongful acts of the directors and others;
● Negligent acts
● Acts of fraud or misrepresentation
● Illegal acts.
● Acts of omission as opposed to those of commission, as these are harder to prove and more difficult to defend against.
● The right of directors and others to authorize and direct the actions of the insured.

Any claims for the management liability insurance can provide protection in case something goes wrong with your business. The insurance policy will offer directors and officers members to take care of their legal actions when the company issued or when they are charged with a crime.

For example, if an employee calls out sick for one week, this will be covered by the management liability insurance. The insurance will also provide indemnity to the directors and officers from any legal actions.


The directors and officers members should be protected to avoid liability and the company's assets. The statutes that protect their rights as individuals need to be updated as well as the corporation statutes. Selective insurance policies such as Management Liability Insurance & Trade Contractors Insurance NJ have different tailored coverage that can help people in many ways.

Author's Bio: 

Juan Bendana is a full time freelance writer who deals in writing with various niches like technology, food, health, Finance, business plan development and more.