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JMP Insurance Services LLC -
Insurance For Tomorrow
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Management Liability

  • Solid Ground

Protecting Your Business from Today's Most Critical Risks

Running a business in California means navigating one of the most complex regulatory environments in the nation. While you focus on growth, innovation, and serving customers, your organization faces an expanding web of liability exposures that can threaten everything you’ve built. Management liability insurance provides essential protection against the claims that keep business owners and executives awake at night.
Why Management Liability Coverage Matters
  • Traditional commercial insurance protects your property and operations, but it doesn't address the sophisticated liability risks inherent in managing a modern business. Employment disputes, data breaches, professional errors, fiduciary obligations, cyber attacks, employee fraud, and governance failures create exposures that can devastate an unprepared organization—financially and reputationally.
  • California's business environment is uniquely challenging. The state's employment laws are the most expansive in the country, with PAGA claims allowing single employees to trigger six-figure penalties. Data privacy regulations under CCPA and CPRA impose strict requirements with significant penalties. Shareholder rights are broader, litigation is more frequent, and jury verdicts are higher than nearly anywhere else in the United States.
  • Even well-managed companies with strong compliance programs face claims. In fact, the mere allegation of wrongdoing triggers substantial defense costs—often $100,000 to $500,000 or more—regardless of merit. Management liability insurance ensures your business can defend itself without diverting resources from operations or putting personal assets at risk.
  • Management liability isn't a single coverage—it's a coordinated suite of protections addressing distinct but interconnected exposures. Some claims trigger multiple coverages, while others fall squarely within one policy. The key is building a comprehensive program that eliminates gaps while avoiding unnecessary overlaps.
The Seven Essential Product Lines:
  • Modern management liability protection encompasses seven specialized coverage areas, each designed to address specific business risks that standard commercial policies exclude. These coverages work together to create a complete liability defense program for your organization and its leaders.
Directors & Officers (D&O) Liability Insurance
  • D&O insurance protects the personal assets of directors and officers when they're sued for alleged wrongful acts in managing a company. This coverage responds to claims alleging mismanagement, breach of fiduciary duty, failure to comply with regulations, or misleading statements that harm shareholders, employees, customers, or competitors.
  • Defense costs and legal fees
  • Settlements and judgments
  • SEC and regulatory investigations
  • Shareholder derivative suits
  • Employment-related claims against individual executives
  • Private Companies: Especially those seeking investment, planning M&A activity, or with outside board members
  • Nonprofits: Board members face exposure from donor disputes, regulatory actions, and employment claims
  • Public Companies: Face heightened scrutiny from shareholders, regulators, and securities litigation
  • Startups: Particularly those with venture capital backing or planning IPOs
  • California's expansive shareholder rights, stringent employment laws, and active plaintiff's bar create elevated D&O exposure. The state's derivative suit provisions and fee-shifting statutes make litigation particularly costly, even when claims lack merit.
  • Securities Fraud Allegation: A tech company's stock dropped 40% after missing earnings projections. Shareholders filed a class action alleging executives made misleading forward-looking statements. Defense costs exceeded $3 million before settlement, with D&O insurance covering the full amount since corporate indemnification wasn't available for all defendants.
  • Nonprofit Mismanagement: A nonprofit's board approved a major facility expansion without proper due diligence. When the project failed, donors sued board members personally for wasting charitable assets. D&O coverage defended the board members and covered the $850,000 settlement.
  • Does my company indemnification protect directors and officers?
  • Corporate indemnification helps but has significant gaps. California law prohibits indemnification for some claims, and indemnification is worthless if the company lacks funds. D&O insurance fills these critical gaps with independent coverage.
  • What's the difference between Side A, B, and C coverage?
  • Side A protects individuals when indemnification isn't available, Side B reimburses the company for indemnification payments, and Side C (Entity Coverage) protects the company itself in securities claims. Prioritize generous Side A limits.
  • Are investigations covered?
  • Yes, most D&O policies cover formal investigations by government agencies, including the SEC, DOJ, and state regulators. This includes legal fees and costs to respond to subpoenas and document requests.
  • Do I need D&O if I'm a small private company?
  • Absolutely. Even small companies face exposure from employment claims against executives, vendor disputes, regulatory actions, and investor disagreements. D&O litigation doesn't discriminate by company size.
  • Getting Started
  • Assess Your Exposure - Consider your governance structure, funding sources, and growth plans
  • Choose Appropriate Limits - Factor in legal costs (often $500K-$2M+) plus settlement exposure
  • Review Policy Terms - Focus on Side A protection, investigation coverage, and broad wrongful act definitions
Employment Practices Liability Insurance (EPLI)
  • EPLI protects businesses against employee lawsuits alleging wrongful employment practices. This includes discrimination, harassment, wrongful termination, retaliation, wage and hour violations, and California's unique PAGA (Private Attorneys General Act) claims that allow employees to sue on behalf of the state.
  • Discrimination and harassment claims (age, race, gender, disability, etc.)
  • Wrongful termination and retaliation
  • Wage and hour class actions
  • PAGA representative actions
  • Failure to promote or hire allegations
  • Defense costs from first dollar
  • All California Employers: PAGA and wage/hour exposure affects companies of every size
  • Rapidly Growing Companies: Hiring volume increases compliance risks
  • Restaurants & Hospitality: High wage/hour claim frequency
  • Healthcare Providers: Complex scheduling creates overtime exposure
  • Retail Businesses: Large employee populations and high turnover
  • California employment law is the most plaintiff-friendly in the nation. PAGA allows individual employees to trigger penalties of $100-$200 per employee per pay period for wage statement violations alone. A single formatting error on paystubs can generate six-figure exposure. Class action waivers in arbitration agreements don't prevent PAGA claims, making virtually every California employer vulnerable.
  • PAGA Wage Statement Claim: A 75-employee retail company faced a PAGA claim alleging paystubs didn't list all required information. Despite no actual underpayment, statutory penalties exceeded $400,000. EPLI covered the $215,000 settlement and $180,000 in defense costs.
  • Wrongful Termination and Retaliation: An employee complained about discriminatory comments, was terminated three months later for documented performance issues, and sued claiming retaliation. Even with solid documentation, the defense cost $95,000 and the case settled for $150,000 to avoid trial risk.
  • Does EPLI cover wage and hour claims?
  • Most modern EPLI policies include wage/hour coverage, but many have sublimits ($250K-$500K common). Given California exposure, negotiate higher sublimits or separate wage/hour limits.
  • Are PAGA claims covered?
  • Coverage varies significantly. Look for policies explicitly covering PAGA with adequate sublimits ($500K minimum). Some carriers exclude PAGA entirely, which is problematic for California employers.
  • What about independent contractor misclassification?
  • Many policies cover misclassification claims, but following California's ABC test (AB5), this exposure has grown substantially. Confirm explicit coverage if you use independent contractors.
  • Does EPLI cover claims by former employees?
  • Yes, claims arising from employment during the policy period are typically covered, even if filed after termination or after the policy expires (with proper tail coverage).
  • Are third-party claims covered?
  • Some policies extend coverage to claims by customers, vendors, or contractors alleging harassment or discrimination by your employees. This is valuable optional coverage.
  • Getting Started
  • Audit Employment Practices - Review handbooks, wage/hour compliance, and documentation practices
  • Evaluate PAGA Exposure - Assess paystub compliance and meal/rest break procedures
  • Secure Appropriate Coverage - Ensure wage/hour and PAGA sublimits match your employee count and risk profile
Errors & Omissions (E&O) Liability Insurance
  • E&O insurance protects businesses that provide professional services or advice against claims of negligence, errors, omissions, or failure to deliver promised services. Unlike general liability, E&O covers economic damages from professional mistakes rather than bodily injury or property damage.
  • Professional negligence and errors
  • Failure to meet service standards
  • Misrepresentation or breach of professional duty
  • Defense costs for covered claims
  • Intellectual property infringement (in some policies)
  • Regulatory defense costs
  • Technology Companies: Software developers, SaaS providers, IT consultants
  • Real Estate Professionals: Brokers, agents, property managers
  • Consultants: Management, HR, marketing, and business consultants
  • Insurance Agents & Brokers: Professional liability for placement errors
  • Architects & Engineers: Design and specification errors
  • Media & Advertising: Content creation and publishing services
  • California's four-year statute of limitations for professional negligence claims extends exposure windows. The state's strong consumer protection laws and willingness to imply professional duties create broader liability than many other jurisdictions. Tech companies face additional scrutiny around data accuracy, service availability, and promised functionality.
  • Software Implementation Failure: An IT consulting firm implemented an inventory management system that malfunctioned, causing a client to lose $300,000 in sales from stockouts. The client sued for negligent implementation. E&O insurance covered the $225,000 settlement and $140,000 in defense costs.
  • Real Estate Transaction Error: A commercial broker failed to discover deed restrictions preventing the buyer's intended use. After closing, the buyer sued for negligent misrepresentation seeking $1.2 million in damages. The case settled for $650,000, fully covered by the broker's E&O policy.
  • What's the difference between E&O and general liability?
  • General liability covers bodily injury and property damage from your operations. E&O covers economic losses from professional mistakes, errors in advice, or failure to deliver services as promised.
  • Are contract disputes covered?
  • E&O typically doesn't cover breach of contract alone, but covers professional negligence occurring within a contractual relationship. If a claim alleges both breach of contract and professional negligence, the negligence portion is usually covered.
  • Does E&O cover work performed by subcontractors?
  • Policies vary. Some cover your vicarious liability for subcontractor errors, while others exclude it. If you use subcontractors regularly, ensure your policy explicitly covers their work or require they carry their own E&O.
  • What about prior acts coverage?
  • Prior acts coverage extends protection to services performed before the policy inception date. When purchasing E&O for the first time or switching carriers, negotiate the earliest possible prior acts date (often your company's founding date).
  • Getting Started
  • Identify Service Exposures - Map your professional services and common failure points
  • Review Client Contracts - Understand indemnification obligations and required coverage limits
  • Match Coverage to Operations - Ensure policy definitions align with your specific professional services
Crime Insurance
  • Crime insurance protects businesses against financial losses from employee theft, embezzlement, fraud, forgery, and computer fraud. This coverage responds to direct theft of money, securities, or property by employees or third parties, including social engineering scams that have become increasingly prevalent.
  • Employee theft and embezzlement
  • Forgery and check alteration
  • Computer fraud and funds transfer fraud
  • Social engineering (invoice manipulation scams)
  • Credit card fraud and counterfeit currency
  • Theft by clients or vendors (with endorsement)
  • All Businesses Handling Money: Banks, retailers, restaurants, property managers
  • Companies with Finance Staff: Bookkeepers, controllers, and AP/AR personnel create exposure
  • Real Estate Firms: Client funds and trust accounts require protection
  • Nonprofits: Donation handling and limited oversight increase vulnerability
  • Professional Services: Particularly those handling client funds
  • E-commerce Businesses: High volume of electronic transactions
  • California's expansive unfair competition laws provide additional remedies for theft victims, but insurance remains critical for rapid recovery. The state's employment laws can make termination and prosecution of dishonest employees complex, often requiring extensive documentation and legal guidance that crime policies help fund through investigation coverage.
  • Bookkeeper Embezzlement: Over three years, a trusted bookkeeper created fictitious vendors and diverted $485,000 in company payments to personal accounts. The crime policy covered the theft amount plus $60,000 in forensic accounting costs to determine the full extent of loss.
  • Social Engineering Scam: An accounting clerk received an email appearing to be from the CEO requesting an urgent wire transfer of $275,000 to complete an acquisition. The fraudulent email was convincing, and the funds were transferred before the scam was discovered. Crime insurance with social engineering coverage reimbursed the loss.
  • How does crime insurance differ from cyber insurance?
  • While both may cover computer fraud, crime insurance focuses on theft of money and property, while cyber addresses technology breaches, data loss, and business interruption. Social engineering coverage can appear in both policies.
  • Are losses discovered after policy expiration covered?
  • Most crime policies include an extended discovery period (typically 60-90 days) for losses occurring during the policy period but discovered after expiration. Continuous coverage eliminates this concern.
  • What's the typical deductible?
  • Crime policy deductibles range from $1,000 to $25,000+, depending on your business size and loss history. Higher deductibles significantly reduce premiums if your loss controls are strong.
  • Does coverage extend to employee theft of data or intellectual property?
  • Traditional crime policies cover theft of physical property and money. Theft of data or trade secrets typically requires cyber insurance or separate intellectual property coverage.
  • Getting Started
  • Assess Exposure Points - Identify who handles money, check signing authority, and wire transfer capabilities
  • Review Internal Controls - Segregation of duties and dual authorization reduce risk and may lower premiums
  • Determine Appropriate Limits - Consider your cash flow, account balances, and potential exposure period before detection
Cyber Liability Insurance
  • Cyber insurance protects businesses from financial losses related to data breaches, cyberattacks, ransomware, privacy violations, and technology system failures. Coverage includes both first-party costs (response, recovery, business interruption) and third-party liability (customer lawsuits, regulatory actions).
  • Data breach response costs (notification, credit monitoring, PR)
  • Ransomware payments and negotiation
  • Business interruption from cyber events
  • System restoration and data recovery
  • Regulatory fines and penalties (where insurable)
  • Third-party liability for data exposure
  • Cyber extortion and social engineering
  • Any Business Collecting Customer Data: Email addresses alone trigger breach notification obligations
  • Healthcare Providers: HIPAA exposure and high-value medical records
  • Retailers & E-commerce: Payment card data creates significant liability
  • Professional Services: Client confidential information increases exposure
  • Technology Companies: Service disruptions impact multiple clients simultaneously
  • Manufacturers: Operational technology vulnerabilities threaten production
  • California leads the nation in data privacy regulation. The California Consumer Privacy Act (CCPA) and California Privacy Rights Act (CPRA) create private rights of action for data breaches, statutory damages of $100-$750 per consumer per incident, and aggressive enforcement by the California Privacy Protection Agency. Breach notification requirements trigger at lower thresholds than federal law.
  • Ransomware Attack: A manufacturing company's systems were encrypted by ransomware, halting production for 12 days. Cyber insurance covered: $85,000 ransomware payment (after negotiation from $250,000), $180,000 in system restoration costs, $320,000 in business interruption losses, and $45,000 for forensic investigation.
  • Data Breach from Vendor: A healthcare provider's billing vendor experienced a breach exposing 18,000 patient records including Social Security numbers and medical information. Cyber insurance covered $240,000 in notification costs, $290,000 for credit monitoring services, $120,000 in legal fees, and $450,000 settlement of regulatory fines.
  • Does cyber insurance cover ransomware payments?
  • Most policies cover ransomware, including negotiation services and payments, though some carriers have added restrictions. Coverage typically requires consulting with law enforcement and using approved negotiators.
  • Are social engineering losses covered?
  • Many cyber policies include social engineering coverage (fraudulent fund transfers from spoofed emails), but sublimits apply. Compare this coverage with crime insurance to avoid gaps.
  • What about privacy violations under CCPA/CPRA?
  • Policies vary significantly in CCPA coverage. Look for explicit coverage of California privacy law violations, including regulatory defense and statutory damages, without unreasonable sublimits.
  • Does cyber insurance cover reputational damage?
  • Policies typically cover PR and crisis management services following an incident. Some include coverage for business income loss attributable to reputation harm, though proving causation can be challenging.
  • Are vendors' cyber failures covered?
  • Most policies include "contingent business interruption" covering losses when a key vendor or service provider experiences a cyber event that disrupts your business.
  • Getting Started
  • Conduct Cyber Risk Assessment - Understand what data you collect, where it's stored, and how it's protected
  • Evaluate Security Controls - MFA, encryption, backups, and endpoint protection affect coverage availability and pricing
  • Review Policy Coverage Grants - Ensure first-party, third-party, and privacy regulatory coverage aligns with your risk profile
Fiduciary Liability Insurance
  • Fiduciary liability insurance protects companies and individuals who manage employee benefit plans (401(k), health insurance, etc.) from claims alleging breaches of fiduciary duty under ERISA (Employee Retirement Income Security Act). Fiduciaries can be held personally liable for losses to the plan resulting from their decisions.
  • Breach of fiduciary duty claims
  • Prohibited transactions under ERISA
  • Excessive fee allegations
  • Failure to monitor service providers or investments
  • Inadequate investment diversification
  • Failure to follow plan documents
  • DOL and IRS investigation defense costs
  • Any Employer Offering Retirement Plans: 401(k), 403(b), pension plans create fiduciary exposure
  • Companies with Employee Benefits Committees: Named fiduciaries face direct liability
  • HR Directors and CFOs: Often designated fiduciaries by role
  • Professional Plan Administrators: Third-party administrators and advisors
  • Nonprofit Organizations: Often have limited resources to defend fiduciary claims
  • ERISA imposes a "prudent person" standard requiring fiduciaries to act solely in participants' interests with the care of a knowledgeable professional. Personal liability cannot be limited by contract or plan documents. California employers must navigate both ERISA and California wage/hour laws, which sometimes create conflicting obligations, particularly around benefit payment timing.
  • Excessive Fee Litigation: Plan participants sued the fiduciary committee of a 300-employee company alleging 401(k) recordkeeping fees were 3x reasonable market rates and investment options included high-cost retail share classes. The case settled for $380,000, with defense costs exceeding $250,000—all covered by fiduciary liability insurance.
  • Failure to Remit Contributions: An employer failed to deposit employee 401(k) deferrals within required timeframes due to cash flow problems, violating ERISA's prohibited transaction rules. The DOL assessed penalties, and participants sued for lost earnings. Fiduciary insurance covered defense costs and the settlement requiring the company to make participants whole.
  • Who is considered a fiduciary?
  • Named fiduciaries in plan documents, plus anyone exercising discretionary authority over plan management, assets, or administration. This often includes executives, HR directors, and committee members, even if not formally designated.
  • Does fiduciary liability overlap with D&O insurance?
  • Yes, both policies may respond to some claims. However, many D&O policies exclude ERISA claims or include restrictive sublimits. Standalone fiduciary liability insurance provides broader coverage without sharing limits.
  • Are company matching contributions covered?
  • Fiduciary insurance typically covers decisions about investment options, fees, and plan management, but not the company's contractual obligation to fund matching contributions. However, disputes about how matches are calculated may be covered.
  • What if we use a plan advisor or TPA?
  • Using professionals doesn't eliminate fiduciary liability—you have a duty to prudently select and monitor service providers. Fiduciary insurance covers claims that you failed in this oversight duty.
  • Getting Started
  • Identify Your Fiduciaries - Determine who has authority over plan decisions and ensure they understand their obligations
  • Document Fiduciary Processes - Regular investment reviews and fee benchmarking demonstrate prudent oversight
  • Secure Adequate Coverage - Policy limits should account for plan assets and potential participant losses, not just defense costs
ERISA Fidelity Bond
  • An ERISA fidelity bond (often confused with fiduciary liability insurance but serving a different purpose) is a federally required protection for employee benefit plans against losses from fraud or dishonesty by those who handle plan funds or property. ERISA requires every person handling plan assets to be bonded for at least 10% of plan assets, with a $1,000 minimum and $500,000 maximum (or $1 million for plans holding employer securities).
  • Theft by plan officials, employees, or trustees
  • Embezzlement of plan assets
  • Forgery related to plan funds
  • Fraudulent handling of plan property
  • Dishonest acts by those with plan access
  • Required for All ERISA Plans: Any plan subject to ERISA must secure a fidelity bond
  • Plan Trustees and Administrators: Anyone handling plan funds must be bonded
  • Corporate Officers Managing Plans: CFOs, HR directors, and others with plan access
  • Third-Party Administrators: TPAs handling plan assets need appropriate bonding
  • Plan Advisors with Fund Access: Investment advisors who can direct asset movement
  • The ERISA fidelity bond requirement is federal law under Section 412 of ERISA, separate from state insurance regulations. California employers with ERISA plans must comply. The bond must be placed with a surety company approved by the Department of Treasury (listed in Circular 570). The bond protects the plan, not the employer or individuals.
  • Administrator Embezzlement: A plan administrator diverted $325,000 from a retirement plan to personal accounts over two years. The fidelity bond reimbursed the plan for the stolen amount, allowing participants to be made whole. Separate fiduciary liability insurance defended the company against claims it failed to properly monitor the administrator.
  • Forged Distribution Requests: A benefits clerk forged participant signatures to process unauthorized distributions totaling $180,000. The ERISA bond covered the loss to the plan, protecting participant accounts from the fraudulent distributions.
  • How is an ERISA bond different from fiduciary liability insurance?
  • The ERISA bond covers theft and fraud by plan insiders, reimbursing the plan for losses. Fiduciary liability insurance defends against lawsuits alleging mismanagement or breach of duty. Both are important, and neither substitutes for the other.
  • What's the minimum required bond amount?
  • At least 10% of plan assets as of the beginning of the plan year, with a $1,000 minimum. Plans holding employer securities may need up to $1 million. Many plans purchase the $500,000 standard maximum.
  • Can the bond be included in our crime insurance policy?
  • Sometimes crime policies include ERISA bond coverage by endorsement, but ensure it meets all ERISA requirements: correct bond form, proper obligee (the plan), and adequate coverage amounts. A separate ERISA bond is often clearer.
  • Who must be bonded?
  • Everyone who "handles" plan funds or property—including physical handling, authority to transfer funds, disbursement power, or significant influence over these functions. This typically includes plan administrators, trustees, officers, and employees with access to plan assets.
  • Are volunteers or unpaid trustees exempt?
  • No, the bonding requirement applies regardless of whether the person is paid. Volunteer board members of nonprofit plans must be bonded if they handle plan assets.
  • Getting Started
  • Calculate Required Bond Amount - Review plan assets annually and adjust bond coverage to meet the 10% requirement
  • Ensure Proper Bond Form - Verify the bond meets ERISA specifications and names the plan as obligee
  • Update as Plan Grows - Increase bond coverage as plan assets increase to maintain compliance
Next Steps: Protecting Your Organization
  • Management liability exposures touch every aspect of your business operations—from boardroom decisions to employee management, professional services delivery, and data protection. The right insurance program combines these coverages into a coordinated defense against today's most significant business risks.
  • Recommended Actions:
  • Assess Your Exposures Each product line addresses distinct risks. Evaluate which exposures your organization faces based on your industry, size, operations, and California's regulatory environment.
  • Review Existing Coverage Many businesses have coverage gaps or outdated policies that don't address modern exposures like PAGA, CCPA, or social engineering. An expert review identifies vulnerabilities.
  • Consult with Specialists Management liability insurance requires specialized knowledge. Work with brokers who understand California's unique legal landscape and can access markets offering robust coverage terms.
  • Contact us to discuss your management liability insurance needs and receive a customized coverage analysis for your organization.

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