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Directors and Officers Insurance provides
directors and officers with an indemnity against a wide
range of potential legal actions which they can face
in the course of carrying out their duties. The policy
also protects a company against costs and expenses arising
in connection with such actions.
People appointed as directors or officers
of a Management Company hold positions of trust and
must act accordingly. They will be liable for any act
which is negligent, outside their authority, or in breach
of duty or trust.
Directors & Officers without insurance
are effectively risking their personal wealth, since
the financial implications of a legal action can be
disastrous. There is no limit on liability, and legal
costs, which are payable in addition, can sometime run
into many hundreds of pounds.
Directors & Officers Insurance
provides the financial security which officials and
companies need. The policy covers the legal liability
of the directors and officers for such matters as breach
or trust, breach of duty, breach of contract, neglect,
omission, misstatement, misleading statement, breach
of warranty of authority and wrongful trading, committed
in their capacities as directors or officers.
Directors and officers can be liable
in the event of a breach of:
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Fiduciary duties
to the company |
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Duties of skill and care to the
company |
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Contract |
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Statutory Duty |
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Duty to Shareholders |
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Common Law |
Additionally in the event of the compulsory
winding up of a company, there may be personal liability
of the directors to people who have dealt with the company.
The probability of a claim being brought
against the directors and officers of a company has
been increased in recent years due to development in
legislation, such as the Companies Act 1985, The Insolvency
Act 1986 and The Company Directors Disqualification
Act 1986, Health & Safety at work Act 1974.
Directors & Officers Insurance
relates specifically to the breaches of duty by directors
and officers in managing and directing a company’s
affairs. It provides personal cover to the individual
directors and officers. A Professional Indemnity policy
of the Managing Agent relates to claims arising from
his normal professional duties and applies to the company
as a whole. A third party can hold an individual director
personal responsible for his actions. For example, a
chairman of a Block of Flats misinterpreted the instructions
of a loss adjustor in the removal of asbestos in a kitchen,
and insurers only agreed to pay the removal costs of
asbestos in the area affected by a leaking pipe and
not the entire kitchen. As a result, the chairman is
being held personally liable for the bill.
Whilst it is not the intention of the
policy to respond in relation to fraudulent, dishonest
or malicious acts, cover is provided for defence costs
incurred in successfully defending such claims.
DIRECTORS & OFFICERS – CLAIM EXAMPLES
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An unruly family
bought a flat in an otherwise select Block. The
owner of an adjacent flat immediately put her property
on the market and alleged that she had been forced
to sell for £20,000 less than the true price.
She is suing the Chairman and Secretary of the Management
Company on the grounds that they have failed to
discipline the family, who had clearly intimidated
them.
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The Secretary of a small block
of flats was asked to obtain alternative Building
Insurance quotations. The contract he selected (in
line with the majority of policies) contained a
“small print” restriction in respect
of unoccupied/unfurnished flats. A pipe subsequently
burst in an unoccupied flat, causing considerable
damage to the property below. The Secretary was
held personally responsible for failing to obtain
the best available cover
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The Management Committee were
held personally liable for failure to appoint a
responsible builder to re-roof a large block of
flats. The firm concerned botched the job and went
into liquidation shortly afterwards. The work was
so poor that most of it had to be done again. |
Click here to apply online
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