Insurance: Are you covered? 

In taking this role you expose yourself to personal financial risk. If you make a decision that turns out to be wrong and creates a financial loss, you could be sued. If you fail to comply with regulations – whether you know they exist or not – you can open yourself to legal prosecution.

The likelihood of this happening is small, but the consequences can be serious and alarmingly personal. It is important you have experts to help you. Protection can be easily arranged through use of a Directors and Officers insurance policy. A policy specifically designed for Directors and Officers of an RMC is not expensive, and the cost is chargeable to the RMC.

Why could you be sued?

1. You fail to identify and rectify essential repairs, resulting in a lessee seeing the value of their property fall. They could sue you for this loss.

2. You appoint a contractor to carry out improvements, but inadvertently exceed your authority in arranging the work. A lessee objects to an increase in their management charge leaving you potentially liable for the shortfall.

3. An employee alleges that you have discriminated against them and they sue for compensation.

The mistake may not have been yours, it could have been made by a fellow director, but you can still be held liable for their mistake because you are held jointly responsible with other directors.

Many claims are “try-ons”: someone claims as they have lost out financially, in the hope of getting a pay-out. Their claim may have a weak legal case, but if you do not have the expertise or financial resources to defend yourself, you may lose.

Your insurers can help you defend claims, pick up significant legal costs, and pay compensation that the claimant is entitled to.

What to look for?

All policies vary in their wordings, and are subject to certain limits and conditions, but typically the policy will provide you with cover for:

Compensation awarded against you for wrongful acts committed in your role, including claimants costs you have to pay;

The cost of defending an employment related claim, including awards made if you lose;

Costs incurred in defending you at a First Tier Tribunal at which you are named as a respondent;

Costs incurred in representing you in court if charged with offences such as corporate manslaughter;

Reasonable costs for attending an investigation which you are legally obliged to attend.

There are two fundamental parts to the protection: access to experts to defend you and, if this fails, compensation and claimant’s costs awarded.

With the security of a Directors and Officers policy, you can fulfil your obligations and be confident that you are not putting your own finances at risk.