Often people ask “What exactly is an MLP policy, and how does it differ from a D&O policy?”
You’ll be aware that if you are a senior director or officer of a company you have a range of duties and also liabilities. If you fail in those duties then there are a number of stakeholders that could bring a claim against you and, critically, a director’s personal assets could be at risk. A claim could be bought against the directors as individuals and it could be that the company does not stand by them or offer them an indemnity.
An MLP policy (Management Liability Policy) provides broader coverage compared to a standard D&O policy (Directors and Officers Insurance).
Let’s explore the key differences between MLP vs D&O policies and why opting for an MLP policy might offer better protection for your business.
Insuring Clauses: Coverage Beyond Basics
A standard D&O policy typically includes coverage for wrongful acts by directors and officers, company reimbursement for indemnifying these individuals, and corporate cover for claims against the company. While this provides essential protection, it may not cover all potential risks.
An MLP policy, on the other hand, will include these covers but go further. No two MLP policies are exactly but if we look at what our MLP covers as an example we can see how much more comprehensive the cover is. The following would be included in the cover:
- Restrictive Covenant Cover: Covers up to £25,000 if an employee breaches their restrictive covenant agreements. This would also cover the cost of actually pursuing an ex-employee if they have breached their restrictive covenant of your insureds.
- Public Relations Costs: Helps manage and mitigate reputational damage following a claim, ensuring that your company’s image remains intact.
- Personal Charity Cover: If the director is also acting as a director or officer of a charity then they are protected by the MLP policy if a claim arises from their charitable involvement.
- Tax Cover: Covers investigations by HMRC into potential unpaid tax liabilities.
- Contract Liability Cover: Covers the company’s defence costs for alleged breaches of contract.
- Employee Dishonesty Cover: Covers the company if they suffer a financial loss due to theft by an employee.
- Corporate Identity Theft: Covers the company if they are a victim of an identity theft.
- Electronic Funds Transfer: Covers the loss to the company by a dishonest third party accessing the company’s systems to improperly transfer funds.
- Legal Pursuit and Contract/Debt Recovery Cover: Provides support in pursuing third parties who have ‘wronged’ the company by breaching a contract or not paying their debts.
This list highlights the enhanced protection an MLP policy offers compared to a standard D&O policy. For instance, we recently upgraded our MLP policy to include these additional covers without increasing the cost.
Why Choose an MLP Policy?
Opting for an MLP policy provides broader and more comprehensive protection for your business. Here are some key benefits:
- Broader Coverage: An MLP policy covers a wider range of risks and supports the company in taking action against wrongdoing.
- Avoids EPL Gaps: A simple D&O policy may have some gaping holes in it. Look very carefully to ensure that Employment Dispute cover is included in any D&O cover. Employment Dispute is by far the most active area of claims for us and the most likely area a business will experience problems.
- Potential Elimination of Separate Legal Expenses Cover: Some MLP policies have taken covers offered by a legal expenses policy and incorporated them into the MLP policy. This means that a separate purchase of a legal expenses policy may not be necessary.
- Greater Comfort: Ultimately what every decent broker wants for their client is to achieve the maximum cover they can at the best value with the most reputable and secure capacity. MLP is a good step toward achieving that.
Tailored Solutions for All Businesses
We’ve recently enhanced our MLP policy with AXA’s capacity. For micro businesses, we offer a more basic D&O policy online, starting at around £100, ideal for SMEs with limited coverage needs.
To learn more about the differences between MLP vs D&O policies and to find the right policy for your needs, contact Zahid at zahid@custodianinsurance.co.uk or call 01483 802 224.
