director officer insurance


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Director Officer Insurance for Blocks of Flats

Introduction - Whilst most owners and freeholders of flats remember to insure the buildings not many realise that other important covers are also available. In particular in you manage a purpose built block, you should consider taking out a little known policy known as director officer insurance. So, what is directors and officers liability insurance cover, well in simple terms it is an insurance cover that provides a protection for company directors, officers and managers against claims arsing from their decisions and actions taken whilst managing their business. In the case of a property management company of flats, the business, is running the the flats themselves.

Alas, sometimes being a director of your flats management company is a thankless task, almost always unpaid and even the most careful director can make decisions which can have serious consequences. In the eye of the law, no distinction is made between a well meaning volunteer and a professional director. Not many individuals realise the seriousness of the situation and without doubt, individuals could face claims for unlimited sums of money. Director officer insurance is not expensive and anyone acting on before of the management group should insist that a policy is purchased.

Directors Duties - Whilst acting in the role of director or officer responsible for a high rise purpose built flats, certain duties are established through statutes.

Duty of Care- This is a simple common law duty of care that requires all directors to always act with the " care an ordinary man would apply in the same circumstances if acting on his own behalf" When delegating duties to another person, the director must be satisfied that the person charged with the responsibility is suitably experienced.
Fiduciary Duty- All directors must act honestly and in good faith and for with the companies best interests in mind. Directors must insure they have no conflict of interest.
Statutory Duty- Any new director should frequent themselves with the various statutes that effect them including the companies Act 1985. Insolvency Act 1986 Financial Services Act 1986 Environmental protection Act 1990. Health & Safety at Work Act 1974. There are others and there are many books written to assist directors with their responsibilities.

If you are responsible for your flats in a block, you will face many responsibilities as well as the above. You will need to make sure that any lifts in the building are kept in a good state of repair and that they are regally inspected in line with statutory requirements. You will need to exercise care when appointing contractors to make sure that their work is of a sufficient standard. You will also need to make sure that the company finances are kept in order.

Cover Provided - the cover provided under a director officer insurance policy is in respect of breach of trust, duty or contract, neglect, misleading statements or wrongful acts or omissions.. The policy will provide cover for any person presently or previously employed as a director or officer, their legal heirs or representatives and any employees of the residential management company. Cover will include these sections;

Legal Defence Costs
Damages awarded against a director ( but not fines)
Out of court settlements
Claimants costs and expenses
Legal Advise
Legal Representation

To better understand these type of insurance, so examples of claims are listed below

Examples of claims

A manager of a flats recommended that the block accept a new insurance from a product provider. The policy was cheaper but the manager failed to spot that the excess was considerably higher. Following a claim for a burst pipe, one of the residents was unhappy at having to pay the higher excess and said that the manager was liable for the difference.
The management committee failed to have the building correctly maintained and painted as per the leases, one resident then sold his flat and had to accept a lower amount because of the poor overall condition of the building. He decided to issue proceeding against the committed for the shortfall.
A member of the committee decided to appoint a builder to carry out some renovation work without taking references or checking the quality of their workmanship. The completed work was so poor that the building was left in an unsafe condition and a new builder had to re do the work. The committee member was held liable for the restoration work.

Frequently Asked Questions.

How much is this cover and what indemnity limits are available? - Premiums for this type of cover typically start from only Ł100.00 per year for a Ł100,000 cover although higher limits up to a Ł1,000,000 can easily be obtained. The cost should be split amongst all the flat owners not just by the directors & officers. If you act or are intended to act in respect of your flats, call us and we will happily provide you with an insurance quotation.
We use a managing agent -do we still need cover? - In simple terms yes, this insurance relates to the breach of duty by the directors an officers relating to the companies affairs. These could be separate to those of the managing agent as sometimes decisions are made not involving the managing agent. The managing agent may well have elected to buy a professional indemnity policy which will cover them for advise given with regards to their professional duties.
Is there anything that is not covered ? - like all insurances, there will be policy exclusions and before purchasing this type of cover ask to see a policy document or Key facts leaflet. Typically, acts of intentional dishonesty or fraud are not covered. Also excluded are fines & penalties. Items more specifically covered by other types of insurance policy are also excluded.

Assetsure is an Appointed Representative of Intasure, a trading name of Blenheim Park Limited who are authorised and regulated by the Financial Services Authority. Assetsure Limited is an appointed representative of Highhouse Insurance Services Limited who are authorised and regulated by the Financial Services Authority.

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