Q&A - Directors and Officers Insurance 

“11: The risk of personal liability can be protected by purchasing the appropriate directors’ and officers’ insurance policy."

ANSWER

The short answer to your questions is that it depends on the terms of your individual lease.

Each lease will set out the expenditure that can be recovered from the service charges. Some leases will allow for costs, such as directors’ and officers’ insurance, to be recovered from the service charges.

However, other leases will not. You will need to consider the terms of your individual lease.

If the lease does not permit the costs of the directors’ and officers’ insurance to be recovered as a service charge, then those costs will need to be borne by the company itself from company funds, and not borne by service charges.

You will need to check the memorandum and articles of association of your company. These should allow for the administration costs of the company, including directors’ and officers’ insurance, to be recovered from company funds.

Cassandra  Zanelli, Partner at Taylor&Emmet LLP

If you are a director of your RMC you are subject to the same laws as a director of a major corporation. As such it is prudent to protect your personal wealth by ensuring directors’ and officers’ insurance is in place. Personally I would also recommend ensuring the policy extends to also protect the company as well as the directors and officers.

Ultimately the formation of the lease will determine if the cost of this policy can be charged to the service charge account. If the lease enables determination of the perils to be selected by the lessor with a phrase such as “any other perils the lessor may determine from time to time” and also allows such to be added to the service charge account the answer is probably yes. That said, leases are complicated documents so if you have any doubt it would be prudent to seek the opinion of a specialist solicitor.

It is, however, worth noting that directors’ and officers’ policies are on a claims made basis. That is to say that the policy in force at the time of the discovery that may lead to a claim will be the policy that will respond to that claim. So it is also prudent to ensure cover will remain in place after you resign as a director.

Paul Robertson, Managing Director at 1st Sure Ltd