Management liability insurance claims examples

Management liability insurance claims in Australia range from unfair dismissal and harassment complaints to employee fraud, director disputes, WHS prosecutions, and tax audits. This article shows what each claim type cost, which policy section responded, and what could have stopped cover.

The examples below are based on published Australian insurer and broker claim scenarios. They are illustrative only. Whether a policy responds depends on the insurer, policy wording, selected sections, limits, sub-limits, and exclusions.

For a full guide to what each section covers, see what does management liability insurance cover.

upcover arranges management liability insurance for eligible Australian businesses.

Claims by section

• EPL: unfair dismissal, harassment, discrimination, adverse action
• D&O: director breach of duty, insolvency, governance claims
• Crime: employee theft, fake invoices, fraudulent transfers
• Statutory: WHS prosecution, environmental or regulatory investigation
• Tax audit: accountant fees for ATO audits
• Entity: company named in a covered management claim

Employment practices liability claims

EPL is one of the most common management liability claim triggers for Australian SMEs. These claims come from current, former, or prospective employees.

Unfair dismissal after raising a workplace complaint

What happened: An employee at a solar energy company was dismissed after raising a workplace issue. The employee lodged an unfair dismissal claim with the Fair Work Commission.

Section that responded: Employment practices liability.

What it cost: Approximately $65,000 in settlement and legal defence costs, based on published AU broker data.

What could stop cover: Known disputes before the policy started, late notification, missing EPL section, or intentional conduct by the insured.

Without relevant cover: The business may need to fund the full $65,000 in defence and settlement from cash flow.

Sexual harassment escalated to Fair Work

What happened: A senior employee at a marketing agency was accused of inappropriate behaviour. The case escalated to the Fair Work Commission, requiring legal defence, internal investigation, and compliance training.

Section that responded: Employment practices liability.

What it cost: Approximately $380,000 in legal fees, settlement, investigation, and training costs, based on published AU broker data.

What could stop cover: Known issues before the policy started, deliberate conduct by the insured, or excluded remedies.

Without relevant cover: The business may need to fund up to $380,000 from reserves. Reputational cost is separate and not usually covered.

Directors and officers liability claims

D&O claims arise when a director or officer is personally named in legal proceedings over a management decision.

Director personally sued over intellectual property breach

What happened: A director left a company and started a competing business. The former company alleged intellectual property breach and issued Federal Court proceedings seeking $820,000 in damages.

Section that responded: D&O liability. The director was personally named.

What it cost: Approximately $360,000 in damages plus $200,000 in legal costs, based on published AU insurer data.

What could stop cover: Insolvency exclusions, prior known facts, personal profit exclusions, or insured-vs-insured exclusions.

Without relevant cover: $560,000 in personal financial exposure.

Crime and employee fraud claims

Crime cover may respond to direct financial loss from employee dishonesty, theft, or fraudulent conduct.

Employee at a food wholesale company diverted payments

What happened: An employee at a food wholesale company with access to the supplier payment system created a fake supplier and submitted invoices over several months. The fraud was discovered after an anonymous tip-off.

Section that responded: Crime and dishonesty cover.

What it cost: $250,000 in direct financial loss, based on AU insurer data for a similar case.

What could stop cover: External cyber attack without employee involvement (that is cyber insurance), poor internal controls if the policy requires them, or dishonesty by the insured.

Without relevant cover: The business absorbs the full loss. Recovery from the employee is often slow and uncertain.

Statutory liability claims

Statutory liability may respond when a regulator investigates the business for breaching Australian legislation.

WHS prosecution after a workplace incident

What happened: A construction company was prosecuted after workers were injured when equipment failed. The regulator investigated and filed charges.

Section that responded: Statutory liability.

What it cost: $100,000 in fines plus $150,000 in legal defence costs.

What could stop cover: Deliberate criminal conduct, intentional breaches, or fines that are uninsurable by law.

Without relevant cover: The business may need to fund $250,000 in combined fines and legal costs from cash flow.

Tax audit claims

Tax audit cover may respond to professional fees incurred when the ATO or a state revenue authority audits the business.

ATO audit of a property development company

What happened: The ATO initiated an audit covering income tax, GST, and payroll records across a property development company with multiple entities.

Section that responded: Tax audit cover.

What it cost: $115,000 in accountant fees for preparing and responding to the investigation, based on published AU broker data.

What could stop cover: Tax payable itself, penalties, interest, routine accounting work, or audits already underway before the policy started.

Without relevant cover: $115,000 in professional fees from cash flow. The tax owed is always separate.

Entity liability claims

Entity cover may respond when the company itself is named in a covered management claim alongside its directors. A customer, creditor, or shareholder alleges the company made a misleading statement or management decision that caused financial loss. What could stop cover includes professional advice errors, contractual liability, known facts, insolvency exclusions, or insured-vs-insured exclusions.

When a management liability claim may not be covered

Common exclusions include insolvency or bankruptcy, bodily injury or property damage (usually public liability), known claims before the policy started, and deliberate misconduct or fraud by the insured. Professional advice errors and cyber incidents are usually covered by separate policies. For full exclusion detail, see what does management liability insurance cover.

What to do when a claim or circumstance arises

Management liability is a claims-made policy. The policy in force when the claim is first made and properly notified is usually the policy that may respond, subject to policy terms. Late notification can affect cover.

If a complaint, demand letter, or regulator notice arises: save all correspondence, do not admit liability before speaking with the insurer, notify the insurer or broker as soon as possible in writing, and follow the policy's notification requirements.

How upcover can help

upcover arranges management liability insurance for eligible Australian businesses with selected insurers and underwriters. Depending on the insurer and policy, cover may include D&O, EPL, crime, statutory liability, tax audit, and entity liability.

• 70,000+ businesses covered across Australia.
• 4.9/5 customer rating.
• 80+ insurance partners.

For related guides, see what is management liability insurance, what does ML cover, and ML insurance cost.

upcover Pty Ltd ABN 17 628 197 437 is a Corporate Authorised Representative (CAR 1299211) of Experience Insurance Services Pty Ltd ABN 41 657 596 506, AFSL 539078.

Frequently asked questions

What are common management liability insurance claims in Australia?

Common claims include unfair dismissal, harassment, employee theft, director breach of duty, WHS prosecution, and ATO tax audits. Each triggers a different section of the policy.

Does management liability cover unfair dismissal?

The EPL section may respond to unfair dismissal claims. Published AU scenarios show employment claims can involve tens of thousands in defence and settlement costs.

Does management liability cover employee theft?

The crime section may respond to direct financial loss from employee theft, fraud, or unauthorised transfers.

How much can an unfair dismissal claim cost?

Published scenarios show costs from five-figure settlements to $380,000 or more for complex matters.

Does management liability cover tax audit fees?

The tax audit section may cover professional fees for responding to an ATO audit. It does not cover tax payable, penalties, or interest.

What management liability claims are usually excluded?

Common exclusions include insolvency, bodily injury, known claims, deliberate misconduct, professional advice errors, and cyber incidents.

How do I notify a management liability insurance claim?

Notify the insurer or broker in writing as soon as a claim, complaint, or circumstance arises. Preserve all documents. Do not admit liability before speaking with the insurer. Management liability is claims-made, so timing matters.

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_{The information in this article is general in nature and provided for informational purposes only. It does not constitute personal insurance, financial, or legal advice. Claim examples are based on published Australian insurer and broker scenarios and are illustrative only. Dollar figures are approximate and sourced from published data. Whether a policy responds depends on the insurer, policy wording, selected sections, limits, sub-limits, and exclusions. All insurance products arranged through upcover are subject to the terms, conditions, limits and exclusions in the relevant PDS. Before deciding whether a product is right for you, consider your circumstances and read the relevant PDS. upcover Pty Ltd ABN 17 628 197 437, CAR 1299211 of Experience Insurance Services Pty Ltd ABN 41 657 596 506, AFSL 539078.}