Fundamentally, management liability insurance is the set of specialized policies intended to protect individuals and companies against third party suits alleging a breach of the management duties with which they have been entrusted.
Aside from the general duty that a company owes to the public at large, executive officers (directors, officers and board members) carry particular duties in their capacity as company management: a duty of diligence/reasonable care, a duty of loyalty, and a duty to obey the law. A breach of these duties can prompt stakeholders to seek redress via a lawsuit, against which this category of insurance is intended to defend. Such coverage also is designed to respond to allegations of wrongdoing arising out of or related to performance disputes between contract counterparties.
Federal, state and local government agencies can impose (external) legal obligations on an organization that can become the basis of regulatory enforcement actions seeking to ensure compliant behavior. While executive officers are ultimately responsible for conformance with applicable laws, enforcement risk can impact any employee with direct compliance responsibilities. In one particular area, the federal ERISA laws impose special compliance duties on plan fiduciaries related to certain employee benefits programs. These hold special significance since individual fiduciaries can be held personally liable for a breach of those duties. Despite its title, it is important that management liability insurance be extended to all levels of employees, particularly those with actual or apparent decision authority, as protection against unintentional violations of certain regulatory obligations.
As with any company that is involved in the volume and types of financial transactions as is Harvard, it becomes an attractive target for theft, embezzlement or fraud from both external and internal actors. Employee dishonesty and/or comprehensive crime insurance applies to these types of perils and is usually expanded to include losses involving computers or other electronic devices. Though usually procured on a stand-alone basis, the most efficient way for large, complex organizations such to guard against coverage gaps for fraud related risks is to blend this cover into the management liability policy package.
Harvard's integrated management liability insurance program provides financial protection for Harvard University itself, including its executive officers (directors and officers and all board members) and employees against third party actions and lawsuits alleging a breach of the fundamental, non-delegable duties owed to the public at large, regulatory agencies, and/or certain stakeholders, in their capacity as company management.
Harvard’s integrated program affords coverage for financial damages, including cost to defend against, alleging such things as breach of contract, violation of loan covenants, conspiracy to defraud, unfair competition, failing to provide professional services, and misrepresentation as a few examples of the many potential third party suits.
Categories of insurances encompassed within the scope of Harvard’s management liability program include:
- Directors and Officers Liability
- Employment Practices Liability
- Fiduciary Liability
- Professional Services (Errors & Omissions) Liability
- Investment Advisory Services Liability
- Media and Publishing Liability
- Data Security (Privacy Event & Security Failure) Liability
- Fidelity/Employee Dishonesty Liability
Additionally, though mainly ancillary to its core educational and research missions, there are several pockets of University operations that create an errors & omissions (E&O) liability exposure to the organization and practicing professionals. Examples include legal advice, real estate leasing, research, educational, and investment advisory services.
Coverage expansions and extensions may be investigated from time to time depending changes to the operational profile of the University. Combining insurance for all these categories into a single policy as Harvard has done, is an effective and efficient was to remove the potential for coverage disputes between insurers underwriting various (separately arranged) policies and allows for broadened terms at a lower premium cost.