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 £100.00 per year for a £100,000 cover although higher limits
up to a £1,000,000 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 Keyfacts 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.
