Management liability can be relevant even before a full board is in place. Management liability is a type of business insurance that is designed to respond to certain claims made against a company and its managers for how the business is run. It often bundles a few covers together, such as:

• Directors And Officers (D&O) Liability: Claims against directors and officers for alleged wrongful management decisions
• Employment Practices Liability (EPL): Employment-related claims like unfair dismissal, bullying, harassment, or discrimination
• Statutory Liability: Some civil penalties and legal defence costs linked to certain breaches of Australian laws (cover varies by insurer)

The exact sections and limits depend on the insurer and the policy wording.

It is recommended to consider management liability if your startup has any of the following:

• External Investors Or A Board: Investors often expect protection for directors and decision-makers
• Growing Team And Hiring Activity: People risk increases as you recruit, manage performance, or restructure
• High Contract Or Compliance Exposure: Claims can arise from the way decisions are made, documented, or communicated
• Need To Attract Independent Directors: Some directors may be reluctant to join without suitable protection in place

A simple example

A startup hires quickly, then has to restructure. A former employee alleges unfair dismissal and discrimination. If the claim fits the policy terms, the EPL section may help with legal defence costs and settlement costs.

Another example is a shareholder claim that the company made misleading statements during a capital raise. If the claim fits the policy terms, the D&O section may respond.

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