How management liability coverage helps the C-suite navigate the constantly changing risk environment

For many executives, legal liability is one of the things keeping them up at night. Business leaders today face a growing range of management liability exposures – including emerging risks affecting virtually every industry.

A convergence of factors

The convergence of several social and economic elements is affecting everyone from manufacturers to law firms. While their full impact remains to be seen, these factors are likely to remain over the long term. In this article, we’ll examine several key factors in the current management liability risk landscape, and what businesses can do to address them.

Factor 1: The long tail of Covid-19

In 2020, specific risk factors increased dramatically, such as supply chain issues and employment shortages.

While businesses have recovered significantly since then, those underlying factors have not disappeared. Executives may have learned to work with, or through, such risks, but related employment practices liability (EPL) exposures will continue to impact management and contribute to increased claims.

Factor 2: An unpredictable economy

Today’s unpredictable economy poses a serious management liability risk. The economy has remained resilient despite the economic headwinds of stubborn inflation and high interest rates – but for how long?

From a D&O perspective, this is a significant risk. If a downturn happens, bankruptcy filings are likely to surge, triggering accusations of mismanagement.

Factor 3: “Right-sizing” the workforce

A related risk is the possibility of lawsuits as a result of layoffs. With any layoff, a company faces the potential for a wrongful termination lawsuit because of the possible perception of discrimination.

Businesses reacted to 2021’s labour shortages by hiring more workers, and organisations that may have over-hired then are now trying to “right-size” their workforces via layoffs.

Factor 4: The political divide

As the political climate remains divided, it’s creating unexpected risks for executives.

For example, many companies have stepped up their diversity, equity and inclusion efforts in recent years, but following the Supreme Court’s decision overturning affirmative action there is uncertainty around how to continue.

ESG programmes pose another set of risks. As legislation changes, executives may have to navigate the liability of unfulfilled or incomplete ESG promises. This is a very different environment than even five years ago.

AI on the horizon

The risks of AI are already far-reaching, such as its role in social engineering attacks. Multi-million-dollar scams driven by AI are making headlines, and those risks will only grow more frequent and sophisticated.

A defence against today’s management liability risks

These management liability risks are moving targets, so brokers and their clients should seek coverage that is both flexible and comprehensive. That was the primary driver behind the launch of Liberty Mutual ProShield, a new management liability packaged solution. It was designed based on input from our clients and brokers to address a broad range of management liability risks, in a customisable package.

To learn more, visit: https://business.libertymutual.com/commercial-insurance-solutions/management-liability/proshield/

By Michael Englert, senior vice president and head of private/non-profit financial lines, Liberty Mutual