Directors and Officers Insurance – does our block of flats need this cover?
Your block of flats and leaseholders may not need the cover, however, the directors of the Residents’ Management Company, Residents Association or Right to Manage Company could be held personally liable for their actions while working on behalf of leaseholders. Taking out Directors and Officers Liability insurance provides defence costs and/or compensation for civil liability charges relating to a “wrongful act” in connection managing your block of flats or apartments. Such acts are defined as any actual or alleged:
- Breach of trust
- Breach of warranty
- Neglect
- Error
- Omission
- Misstatement
- Misleading statement
Always review the definitions of the policies you are offered as policies may contain different definitions so do read the small print. There will also be Limitations and Exclusions to this type of cover, for example:
- Dishonesty, Fraud, Malicious Conduct or Personal Profit
- Bodily injury (other than defence costs)
- Property damage
- Fines, penalties and damages
- Pollution
Claims that have been handled include:
- A claim for breach of lease provisions relating to the alleged failure to maintain the property, and in respect of steps taken which had a damaging effect on value. A claim alleging the over-charging of service charge. Reimbursement was pursued.
- Following damage caused to a block of apartments, it was discovered that the insurance purchased by the directors was inadequate to cover the loss. The residents brought a claim for losses they incurred as a result.
- A claim by a leaseholder alleging that the directors had slandered his character at a meeting of shareholders. Damages for injury to feelings and defence costs amounted to over £15,000.
- A claim for take no notice of the Companies Act 2006, in that the directors’ allegedly passed resolutions (removing the Claimant as a director) at an EGM contrary to the provisions of the Act and the company’s Articles. Damages in the sum of £25,000 were claimed.