What Is Directors' & Officers' Insurance?
Directors' & Officers' Insurance (often called D&O Insurance) is designed to protect company directors, officers, and sometimes committee members against personal liability claims made in connection with their role. This coverage is particularly important for those managing blocks of flats.
For an RMC, this means individual directors may have cover for claims that arise from their management decisions on behalf of leaseholders. Understanding the distinction between D&O and property owners' liability is essential.
Without this cover, directors could be personally exposed to the costs of legal defence and potential damages. Individual flat owners may also require landlord insurance for their own units.
Why RMC Directors Often Consider It
Even though RMC directors are frequently unpaid volunteers, they are still subject to the legal duties of company directors. Claims may be brought if they are alleged to have breached those duties.
Health & safety obligations
Such as alleged fire safety failings in communal areas
Service charge management
Disputes about how funds are allocated or spent
Negligence
If decisions are claimed to have been careless or outside directors' authority
Employment disputes
Where caretakers, cleaners, or staff are employed by the RMC
Regulatory investigations
Where government or local authorities review the RMC's actions
Important: Even if a claim proves unfounded, the process of defending it may still create significant costs.
What D&O Insurance May Cover
Typical D&O policies for RMCs may include protection for:
Legal Defence Costs
Covering solicitors' fees and court expenses when claims are made
Compensation & Settlement Payments
Depending on the policy terms and nature of the claim
Employment-Related Claims
Protection for claims brought by staff employed by the RMC
Regulatory Enquiries
Including investigations by government or housing authorities
Common Exclusions
As with any insurance product, there are limits to what D&O covers. Common exclusions include:
Fraud or dishonesty
Deliberate wrongdoing is not insurable
Bodily injury or property damage
These are usually covered by liability policies instead
Certain insolvency-related claims
Depending on the insurer
Pure contractual disputes
Unless specifically extended
Who Pays for D&O Insurance?
In most cases, the RMC arranges and pays for D&O cover. The cost is typically recovered through the service charge from leaseholders.
This is generally considered a legitimate service charge expense as it protects the company's governance structure.
Benefits for RMCs
Protects individuals
Reduces the risk of directors' personal finances being affected
Encourages participation
Leaseholders may be more willing to act as directors when cover is in place
Supports good governance
Helps directors make necessary decisions with confidence
Provides reassurance
Shows leaseholders that the company is managing risks responsibly
D&O Insurance FAQs
Is D&O insurance mandatory for RMCs?
No, but many RMCs choose to arrange it given the personal exposure directors may face.
Does D&O cover apply to share-of-freehold companies?
Yes, it often still applies. If you are registered as a company with directors, those individuals may carry liabilities.
Is D&O automatically included with block of flats insurance?
Not usually. It is often offered as a separate policy or optional add-on.
What limits of indemnity are typically available?
D&O limits can range from £100,000 to several million, depending on the size and complexity of the RMC.
Can retired directors still claim?
Yes, many policies include run-off cover for claims arising from actions taken while serving as a director.
