What is the difference between directors and officers (D&O) insurance, and a management liability policy (MLP)? Each can provide some cover for a company’s upper management and decision makers. But is there any overlap between the two? And which type of cover is right for your business?
What is Directors and Officers (D&O) Insurance?
D&O insurance provides cover for your business’s directors and officers in the event of legal claims made directly against them. If someone alleges that one of your decision-makers has acted wrongfully while managing the company, a D&O policy can cover their legal fees, along with any settlements or compensation that may be due following the claim.
Such claims could come from regulators, shareholders, creditors, competitors, or even from current or former employees. Plus, directors and officers may be held liable for a number of risks, including cybersecurity, data breaches, and losses arising from mergers, acquisitions, insolvency, and bankruptcy.
With this in mind, D&O insurance can act as an essential safety net, allowing your upper management to make key business decisions with confidence.
Read our full guide to D&O insurance, and why your business may need it.
What is a Management Liability Policy (MLP)?
MLP can include a form of D&O cover, along with cover for corporate legal liability, and for employment practice liability. The D&O cover can cover your upper management for allegations of breach of trust, defamation, insider trading, negligence, and other types of wrongdoing. Beyond this, MLP can provide additional cover for legal claims following alleged breaches of health and safety law, unfair dismissal, discrimination, harassment, pay inequality, employment contract breaches, and more.
MLP can also cover the costs associated with legal claims made against your company and its directors.
What’s the Difference Between D&O Insurance and an MLP?
Compared with D&O insurance, MLP offers much broader and more comprehensive cover.
In short, while D&O insurance will only cover your directors and officers for alleged wrongdoing, MLP provides additional cover for individual employees, and for the company as a whole.
D&O or MLP: What Sort of Cover Does Your Business Need?
D&O and MLP – is it a case of either/or, or does your business need both types of cover?
As many management liability insurance policies include some level of D&O cover, it might seem as though all businesses can get away with getting an MLP to cover all risks. However, a dedicated D&O policy can provide some tailored cover that may be beyond the scope of an MLP.
It all depends on the size and structure of your company. If you are running an SME, then the comprehensive cover provided by an MLP could indeed tick all of your boxes. Yet if your company is structured in such a way that your decision makers could be personally liable for claims of negligence and wrongdoing, you may also need the specialist, focused cover provided by a dedicated D&O policy.
Get Help Deciding What Cover Your Business Needs
If you cannot decide which form of cover is right for your business, or if you are having difficulty understanding the difference between D&O and MLP, talk to us.
We are an independent Lloyd’s broker, and since 1982 we have been helping businesses of all sizes get the cover they need at the best price. We will take the time to get to know your business, and the risks you are facing, so that we can advise you on your unique insurance requirements.