Why small business owners can’t ignore Management Liability insurance
May 7, 2026
“Why aren’t we covered? We had insurance in place at the time!”
If you are responsible for your business’s insurances, it is important that you understand the difference between ‘occurrence based’ and ‘claims made’ insurance policies.
A ‘claims made’ policy is an insurance policy that only covers claims made and notified to insurers during the policy period, irrespective of when the incident or the specific circumstances that gave rise to the claim occurred.
Some examples of common ‘claims made’ insurance policies follow:
- Professional Indemnity
- IT Liability
- Cyber
- Management Liability / Directors & Officers Liability
An ‘occurrence based’ policy is an insurance policy that will respond to a claim arising from an incident that occurred during the policy period, irrespective of when the claim is made (even if you don’t have insurance in place in the future when the actual claim is formally made against you).
Examples of common ‘occurrence based’ insurance policies follow:
- Public & Products Liability
- Property
- Motor Vehicle
The distinction is an important one…
Under a ‘claims made’ policy, if you don’t maintain your insurance coverage and a claim is brought against you in the future that alleges some form of wrongdoing or negligence in the past, you won’t be covered, irrespective of whether you had insurance in place at the time.
HOW TO ENSURE YOU DON’T LEAVE YOURSELF OR YOUR BUSINESS EXPOSED
We have three key recommendations:
- If you are considering cancelling any of your current insurance policies, or allowing them to lapse (i.e. not renewing them), ask your insurance broker / adviser to advise you on whether you will still be covered for claims that arise in the future that relate to alleged acts or errors that occurred prior to the policy being lapsed or cancelled. If the answer is ‘NO’, ask for advice on your options.
- If your insurance broker / adviser ever recommends that you switch from ‘claims made’ to ‘occurrence based’ policies or vice-versa, ask them to explain the coverage implications of making such a change.
- If you have any questions or concerns at all, or if you’d like more information, please do not hesitate to CONTACT US.
This communication is for general information purposes only and does not take into account any specific individual’s or business’s objectives, financial situation or needs. Before acting on any of the information provided herein, you should consider how it applies to your specific circumstances and contact an insurance broker and / or other appropriately qualified professional to discuss. Any advice given on what is or is not covered under any specific insurance policies is general only. You should always refer to the relevant PDS and policy wording to determine whether the coverage is appropriate for your individual circumstances.
Author: Sam Giorgatzis
