Katrina Jones from Residentsline, investigates the importance of Directors’ and Officers’ Liability Insurance for your Residents’ Management Company and outlines possible claim examples.  

The Importance of Directors and Officers Liability Insurance 

As a member of a Residents’ Management Company, you bear a multitude of responsibilities aimed at ensuring the seamless operation of your block of flats. 

These responsibilities encompass finance and accounting, service charges, insurance needs, maintenance, inspections, and overseeing major works and reparations. Managing such a comprehensive list demands meticulous planning and experience, making it susceptible to occasional errors. 

It is crucial to acknowledge that, although mistakes are an inherent part of any management role, errors leading to incidents such as damage or personal injury can result in legal actions being taken against the Residents’ Management Company. This liability falls on the directors and officers of the Residents’ Management Company, who are held accountable for decisions made in their official capacity. 

This may seem unfair. After all, being a director or an officer of a Residents’ Management Company is a voluntary role which requires a lot of time and effort on behalf of the residents in the block. As such, it can be difficult to understand how directors and officers can be penalised so heavily. Regardless, the fact remains that directors and officers require suitable protection in case of legal action being taken against them. Nevertheless, the reality is that directors and officers necessitate adequate protection in the event of legal actions. 

Claim Examples 

• Tenants of a block of flats brought legal action against the Residents’ Management Company for failing to appoint a building company in a timely fashion. The external brickwork of the building needed reparation, as damage had been caused following a heavy rainstorm. This had been reported to the committee, however, repair work had not been commenced several months later when a subsequent rainstorm caused further damage. 
• A Residents’ Management Company faced an allegation of wrongful termination after it fired an employee for gross misconduct. 
• A Residents’ Management Company Director faced being sued as a result of a property being devalued following their decision to paint the exterior of the building an unusual colour. 
• At a party in one of the flats, an over-crowded balcony collapsed, seriously injuring several people. A claim against the Insurance Company is incepted with a potential cost of £7.25 million, however the RMC only has £5 million Property Owners Liability cover in place. The individual flat owners are distressed as this amount is well below the potential cost of the claim. The flat owners believe that the RMC was wrong to reduce the cover and they bring legal action against the responsible director to make up the shortfall. 
• An officer pays a contractor to fix their roof with RMC funds before the works have started. Subsequently, the contractor absconds with the money, never to be seen again. There is an exposure to potential legal action being brought by the individual flat owners following the loss of RMC funds due to a mistake made by an RMC member. 

Directors and Officers Liability Insurance 

Directors and Officers Liability Insurance coverage extends protection to members of Residents’ Management Companies, shielding them from legal liabilities. Underwritten by AVIVA Insurance, our policy protects directors and officers against the cost of potential claims for alleged wrongful acts.  

These may include: 

• Breach of trust 

• Breach of duty 
• Neglect/error/omission 
• Misstatement 
• Libel and slander 
• Breach of warranty of authority 
• Wrongful trading 

Residentsline’s Directors and Officers Liability Insurance provides a comprehensive solution to protect your directors. Protect Your Directors with Residentsline and use our easy-to-use portal to get a quote and be covered today! Click here to get a quote.