Companies today face a multitude of workplace-related liabilities. Employment practices, financial decisions and even cybersecurity threats can expose them to potential risks. To learn more about Management Liability and the types of policies available to protect against these threats, we spoke with David Andreas, Senior Broker, Professional Liability, Burns & Wilcox, San Francisco, California.
What are the greatest risks in the Management Liability industry today?
D.A.: The biggest thing we are seeing is frequent changes in laws and regulations, especially in California. We are starting to see new laws here regarding workplace violence and employment practices liability, specifically.
Cybersecurity threats have always been a big deal, putting companies at risk of data breaches, which could lead to financial losses. Another big thing we are seeing is how companies are handling environmental, social and governance (ESG) concerns related to their business. Plus, everyone is concerned about general economic uncertainty — how the economy can impact business performance, and how that could lead to litigation risk.
Which insurance policies can help companies respond to these threats?
D.A.: All of those threats could lead to claims against the board and the officers of the company, so Directors and Officers Insurance (D&O) is the biggest one, because that protects the balance sheet of the company as well as the directors and officers against those risks.
Employment Practices Liability Insurance (EPLI) is another type of policy designed for claims that employees bring against the company for wrongful termination, sexual harassment, discrimination or wage claims. In California specifically, there is a new law, Senate Bill 553, that just went into effect this year requiring employers to establish workplace violence prevention plans. That is something that companies in California have to focus on now, and an EPLI policy can supplement that coverage and help them get those plans in place.
Cyber Liability is another policy that can protect against data breaches or social engineering scams that could cause a loss of client or employee information.
What should companies be aware of relative to these risks?
D.A.: The policies and limits will vary depending on the size and industry of the company. A healthcare company might buy higher limits because there is more litigation in that area. If you only have 10 employees versus 1,000, you would probably want your coverage to reflect that. A million dollars is a pretty standard limit for smaller to middle market size companies, but it really does vary.
What additional steps should companies take to complement insurance coverage from a prevention standpoint?
D.A.: They should think about risk management and assessment. A lot of good companies invest in having a risk manager on the payroll; that is a big step in the right direction.
Training and education are also important. Do you invest in training programs for your employees and executives on governance and ethical practices? What kind of cybersecurity infrastructure do you have? Do you train employees on recognizing phishing scams or cyber threats?
Also consider what kind of diversity initiatives you have. What is the workplace culture like, to help reduce the risk of discrimination lawsuits? And then, of course, do regular reviews and audits of your policies and procedures.
Can you give an example of a scenario you have dealt with recently that illustrates how companies are mitigating these risks?
D.A.: Right now, I am helping a lot of insureds get their workplace violence prevention plans in place under California’s new law, SB 553, and working with their EPLI carriers or even getting them standalone policies for workplace violence. They are putting policies and procedures in place like: How do you identify potential threats? What kind of training are you doing so employees know how to respond and where to go if something was to happen, and how to report incidents without feeling like they are compromising their own safety. Really, it is just fostering a culture of safety for the entire workplace.
What are the greatest opportunities for brokers to get into Management Liability Insurance right now?
D.A.: Right now, Personal and Property Insurance are really tough in California, with the risk of wildfires. But Management Liability is extremely soft, meaning it is really easy right now to get a competitive quote. I have been telling brokers that it is a good time to try to cross sell those coverages. If they buy Management Liability Insurance already, make sure it is going out to market and use this opportunity to save them some money on those coverages. If they have not bought Management Liability Insurance yet, it is a good time to because the market is a lot more competitive, and you can get it at a cheaper rate than you normally would in a hard market.
What advice would you give brokers on targeting people to sell this coverage to?
D.A.: I think every company should consider Management Liability Insurance. Try to identify certain industries that could have higher exposure, like technology, finance or anything healthcare related. I used to target a lot of startups and emerging companies, especially in technology, because they tend to lack formal governance structures, and they are not always aware of their exposures. You can even focus on the other side of the spectrum; focus on companies that do have dedicated executive teams and boards, because any company that has a board should have Directors and Officers Insurance. If they do not, they could be left unprotected.
What three questions should brokers be asking clients relative to these products?
D.A.: “What specific risk does your organization face regarding management decisions and governance?” That will lead to Directors and Officers Insurance.
“What is your experience been with claims or litigation in the past, and how prepared are you for potential future incidences?”
Always ask if they are aware of the new laws, especially in California – “Do you know about the new workplace violence law?” That will sell EPLI pretty quickly if they are not aware of it.
Those are all good questions to ask to create a customizable option for purchasing Management Liability products.
Management Liability Insurance
WHY YOUR CLIENTS MIGHT NEED IT: To cover the financial losses of the business in the event of litigation, in addition to the personal assets of corporate directors and officers.
PROTECTS AGAINST: Risk exposure related to governance, finance, employee benefits or management activities.
EXPERT OPINION: “Management Liability is extremely soft, meaning it is really easy right now to get a competitive quote. I have been telling brokers that it is a good time to try to cross sell those coverages.”
