We believe that anyone who is willing to take on the workload of managing a Residents Management Company (RMC) or Right to Manage Company (RTM) should be protected from personal financial loss.
Directors of a company, even a relatively small company running a block of flats, face potentially unlimited personal liability if anything goes wrong with financial, legal or practical maintenance matters.
The good news is that you could have Directors’ and Officers’ Liability insurance that, while broadly based on the sort of cover that directors of big businesses take out, may be tailored and priced for companies like yours.
They can cost from as little as a few pounds per flat, and providing your lease allows for it or your co-lessees agree, you could add the cost to the service charge budget.
You might think that you are all friends and that nothing could go wrong, but your neighbours may have no choice but to sue if they suffer a loss. Look at a few scenarios below and you can see how you could be affected:
Directors of RMC or RTM companies owe their fellow residents a duty of care because anything they do or fail to do, can impact on individual flats and their owners. Directors’ and Officers’ policies indemnify them for action taken against them to recover monetary loss and legal fees as a result of something they have done, or failed to do. What should be covered?
Entity insurance provides protection if the company itself, rather than an individual, is sued. Should an individual think they have cause for litigation, their lawyers will consider whose decision resulted in the loss and act accordingly. If a decision to delay repair works was taken collectively by all directors, for instance, the logical choice may be to pursue the company through the courts. It is often included in Directors’ and Officers’ cover, but be sure to check. It is included as standard in Deacon policies.
This is different to Directors’ and Officers’ cover. Legal expenses insurance can help fund unexpected legal disputes with contractors, neighbours and employees. Deacon’s legal expenses cover*, designed for Residential Management Companies (RMC), also provides 24/7 access to a legal advice line putting you in touch with professionals who can help with matters relating to your block or association. Failure to act quickly might prejudice your position and result in you losing a dispute by default, which can also be the case if you can’t afford to pay for legal costs yourself. To find out more click here.
The sole purpose of this article is to provide guidance on the issues covered. This article is not intended to give legal advice, and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and/or market practice in this area. We make no claims as to the completeness or accuracy of the information contained herein or in the links which were live at the date of publication. You should not act upon (or should refrain from acting upon) information in this publication without first seeking specific legal and/or specialist advice. Arthur J. Gallagher Insurance Brokers Limited trading as Deacon accepts no liability for any inaccuracy, omission or mistake in this publication, nor will we be responsible for any loss which may be suffered as a result of any person relying on the information contained herein.