Serving as an officer of a Residents’ Management Company, Residents Association, or Right to Manage Company comes with a host of legal responsibilities.

These responsibilities can extend to potential personal liability for the decisions and actions taken while holding the position of a Director or Officer. To mitigate these risks, Management Liability Insurance offers crucial protection.

This article explores the intricacies of this insurance policy and demonstrates its importance through real-life case studies.

Understanding Management Liability Insurance

Management Liability Insurance offers a comprehensive policy specifically crafted to safeguard individuals who have served as Directors and Officers in your organization, covering both past and present roles.

It encompasses two essential components: Directors and Officers Liability Insurance (D&O Insurance) and Corporate Liability Insurance in one policy and for one price. Let’s explore these components in more detail.

Directors and Officers Liability Insurance

Directors and Officers Liability Insurance is a critical part of Management Liability coverage, providing protection against the financial repercussions of potential compensation claims. These claims may arise due to alleged wrongful acts committed during the tenure of Directors or Officers.

Wrongful acts can include decisions, actions, or omissions that lead to financial losses, mismanagement, or alleged breaches of duty. This insurance ensures that individuals in leadership positions are protected from personal financial liability.

Corporate Liability Insurance

Corporate Liability Insurance safeguards the entire Residents’ Management Company, Residents’ Association, or Right to Manage Company against the financial consequences of potential claims.

It includes coverage for the cost of legal defence, as well as the amount of awards and damages that may result from claims made against the organisation as a whole.

Real Case Studies Illustrating the Need for Management Liability Insurance:

• 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 required repair due to damage from a heavy rainstorm, and the committee had been notified. However, despite the report, repair work had not commenced. Several months later, another rainstorm exacerbated the 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.
• A director of a Right to Manage company breached his authority by appointing a family member’s company to undertake work on their behalf. Proceedings were issued by the claimant for non-payment of fees of £42,000 following cancellation of the contract.
• Claims for Unfair Prejudice pursuant to s994 of the Companies Act (allegations that company affairs are being, or have been, conducted in an unfair manner, and which is prejudicial to the residents’ interests, i.e. attempted exclusion from management and/or abuse of power / breach of Articles of Association): A claim for unfair prejudice relating to a former director’s exclusion from management, contrary to the Articles of Association, resulting in his resignation. Defence costs were in excess of £5,000.
• Defamation in respect of statements made by the directors: A claim by a member/resident alleging that the directors had defamed his character at a meeting of shareholders. Damages for injury to feelings and defence costs amounted to over £15,000.

And some more…

• Breach of lease provisions (by landlord or residents/tenants): 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 detrimental effect on value.
• A claim alleging the over-charging of service charge. Reimbursement was sought. Breach of Companies Act 2006: A claim for disregarding 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.
• A claim alleging the over-charging of service charge. Reimbursement was sought. Breach of Companies Act 2006: A claim for disregarding 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. A claim for damages totaling £25,000 was made.
• A claim for the unlawful amendment of a company’s Articles, such that the directors contravened the Companies Act 2006. It was alleged that there had been a failure to pass a special resolution with the requisite number of votes. Failure to protect the interests of members: Following damage caused to a residential block of flats; it was discovered that the insurance purchased by the directors was inadequate to cover the loss. The shareholders of the property (the residents) brought a claim for losses they incurred as a result.

Management Liability Insurance is a vital protective measure for officers and directors of Residents’ Management Companies, Residents’ Associations, and Right to Manage Companies.

By providing coverage for legal defence, compensation claims, and other financial consequences, this insurance safeguards individuals and the organization itself.

With premiums starting at just £95, it’s a cost-effective solution that ensures peace of mind. In just two minutes, you can get a quote and secure coverage. This makes it an essential investment for those in leadership roles.

For any inquiries or for further assistance, please call 0800 281 235, and you could be covered today.