Directors and Officers Insurance for Residents Associations – is it really necessary?
If you are a director of a residential association, your personal assets are at risk and you could be held personally responsible for a breach of duty in carrying out day to day management activities. The company doesn’t have to be a limited company, it could be an association or an LLP but they all face the same exposure.
There are over 200 possible offences identified under the Company’s Act alone where a director can be held personally liable. Directors of resident’s associations are often acting from a voluntary capacity and are unaware of the risks they face as an individual. The fact of the matter is that the law doesn’t ignore smaller companies over larger FTSE 100 companies – they are all entities and the law makes no distinction between them.
What could possibly go wrong?
Here are some examples of actual claims brought against directors of residents associations, from various insurers:-
- An action was brought against directors of a block following damage to the wiring which was caused by a squirrel entering through the roof space from nearby trees. It was alleged that the directors had failed in their duty to maintain the trees properly. The defence was successful but the legal bill was over £4,000.
- Directors of a resident management company were fined by Companies House for failing to file their annual accounts on time. Their legal defence was over £5,000
- A resident sued the directors for devaluation of their flat. It was alleged that the directors had failed to maintain the building and ensure it remained in a good state of repair. Legal costs were over £13,000
- Directors were unaware of new legislation resulting in a claim against the management company
These are just a few examples of how easy it could be for a director to breach their duties. With this in mind, it would be vital for a Directors & Offices Insurance to be put in place to cover the legal costs and awards in defending their position.
Typically a D&O policy will cover the following:
- Legal Defence costs
- Damages awarded against a director
- Out of court settlements
- Claimants costs and expenses
- Legal advice
- Legal representation
*note that the policy would not cover deliberate or fraudulent acts, bodily injury or property damage.
Who does it cover?
A policy will typically cover any director, officer, employee, shadow director or trustee past and present whilst working in their capacity on behalf of the resident’s association or organisation.
And its not as expensive as you might think!
For more information or to get a quote please contact
Caroline Fairclough ACII, Chartered Insurance Broker
Director – Sentio Insurance Brokers
T: +44 (0) 121 213 6420
M: +44 (0) 7393 460 217
The Information contained within this document is general information only and believed to be correct at the time of publishing. It cannot be relied upon as advice or information in respect of any individual situation.