There are areas of optional cover that some Residents’ Management Companies (RMC) decide not to take out when they are reviewing their options for their block of flats.
This can have highly detrimental effects on residents, directors, officers and landlords. A summary of the most important products which are often overlooked is shown below:
Directors and Officers Liability Insurance
This valuable cover protects the Directors and Officers of a RMC, Residents’ Association or RTM Company against “Wrongful Acts”, errors or omissions in the management of the block of flats or apartments for which they are accountable.
Directors and Officers should be mindful that they can be held personally liable for their acts, errors or omissions and that the law does not differentiate between the director or officer of a RMC, Residents’ Association or RTM Company and that of a major corporation. Astonishingly some directors choose not to protect their personal wealth with a Directors and Officers liability insurance policy.
In recent times leaseholders of a block of flats effectively brought an action against the residents’ committee for failing to engage a building company in an appropriate fashion to restore external brickwork on their block of flats. Damage had been caused following a heavy rainstorm and reported to the Committee; however, repairs had not been commenced several months later when a subsequent rainstorm caused additional damage. The resulting costs and legal charges resulting from damages awarded by the court and paid from RMC directors’ personal assets could have been avoided had the RMC taken out Directors and Officers Liability insurance.
Terrorism: Could your block of flats be a target?
Do we truly know who our neighbours are? Even if you live in the quietest countryside area and think your block of flats is unlikely to be a target for terrorists, think again. It can often be tempting, whilst organising renewal of your flats insurance, to leave out terrorism cover to save a few pounds. After all, your property may not be at serious risk of being a target for a terrorist attack.
However, as unlikely as it might appear, if an incident did occur this would not be covered by your standard buildings policy. Furthermore, if terrorism insurance had been refused, not only could your residents have to continue paying mortgages on non-existent property whilst needing funds to rebuild, but the RMC directors could be held responsible. Don’t forget that directors have personal responsibility for their decisions and actions within the Residents Management Company. Taking out the appropriate cover is a small price to pay in comparison to risking your personal assets.
The Employers Liability (Compulsory Insurance) Regulations 2008 requires that Employers for any Company with Directors and/or Employees (even if only one and unpaid) have Employers Liability Insurance. Failure could result in a fine of up to £2,500 per day for each day that cover is not in place. Most blocks of flats are managed by directors and either employ or have residents who provide cleaning, gardening or administration duties – make sure your RMC is protected.
What if your residents prefer to opt out of certain insurance products?
What should you do if your owners want to opt out of certain covers you feel should be considered? It is important that the leaseholders are made aware and accept that you as directors will not be held responsible for their decisions; a draft letter should be forwarded to each owner, along the following lines:
On …date… the leaseholders of XXX Ltd decided against incepting the following insurance covers:
- Employers Liability Insurance
- Terrorism Insurance
- Directors & Officers Liability
The leaseholders of XXX Ltd (list of whom are shown below) will not hold the shareholders/decision makers accountable for any losses that may be due to us not effecting these insurance policies.
Remember to make sure all flat owners sign it.