- Why do I need cover of Directors & Officers Liability Insurance?
- In the event of a legal action from a Third Party, it is likely that along with your Management Company / Residents Association YOU PERSONALLY may be listed as a Defendant.
- As a Director / Officer of a Management Company YOU have unlimited personal liability.
- The law does not distinguish between the Director of a Management Company / Residents Association and that of a major corporation and ignorance of the law is no defence.
- You may be accountable not only for your own actions, but also for those of your fellow Directors & Officers.
- What type of legal liabilities am I exposed to?
- Multi Unit Developments Act 2011
- Health & Safety – fire safety, electrical and mechanical equipment checks.
- Insolvency Act (wrongful trading)
- Companies Act 1963 – 2009
- Dishonesty of fellow directors
- Disability Discrimination Act
- Failure to supervise
- Racial & Sexual discrimination
- Data Protection Legislation
- EU directive & Regulations
- I have stepped up as a Director / Officer in an unpaid voluntary capacity – Can I still be held PERSONALLY liable?
- Yes, the law does not distinguish between the Director of a Management Company / Residents Association and that of a major corporation and ignorance of the law is no defence.
- In the event of a legal action from a Third Party, YOU PERSONALLY may be listed as a Defendant you may have unlimited personal liability in law.
- What cover is provided under a Directors & Officers Liability Insurance Policy?
Liability from a wrongful act – where there is any actual or alleged wrongful act or omission by a committee member, directors or officers individually or collectively.
- Costs and expenses, with prior agreement of the insurer, that are incurred in investigation, settlement, defence or appeal of a claim
- The policy is on a claims made basis – the policy will only respond to claims discovered and notified to the insurer during the policy period
- The limit of insurance is aggregated, and the policy lasts for 12 months, unless otherwise stated.
- Examples of D&O claims
Examples of D&O claims as provided by one of our Insurers
- Being held responsible for the engagement of an incompetent contractor
- A prospective employee who may sue an individual trustee of the residents association personally claiming racial discrimination
- A property Owner who may sue the management company for not ensuring that house rules were adhered to, and which could result in the owner having to sell below the market value.
- A resident claiming that the trustees of their residents association failed under Health and Safety regulations
- Residents suing the trustees of their residents association for misusing their funds
- Surely the exposure to these types of claims is minimal once our Management Company / Residents Association is run correctly?
It is important to remember that YOU DON’T NEED TO BE GUILTY TO BE SUED!! The financial resources alone required just to defend an action could be substantial. Do you personally have access to the funds required to provide a legal defence?
- We employ a Managing Agent to manage our development why do we still need cover?
– In the event of a legal action from a Third Party, it is likely that they will name all parties involved in the management of your development. Depending on the action this could include:
• The Managing Agent or
• The Management Company / Residents Association or
• YOU PERSONALLY or
• ALL of the above!!
- If you currently have Directors & Officers Liability Cover in place, have you asked your insurance provider the following questions?:
– What is the Limit of Indemnity provided for under the policy?
– What is the policy excess?
– Is Entity Cover included?
– What is the Limit of Indemnity provided for under the Entity section of the policy?
– What is the policy excess applicable under the Entity Section of the policy?
– How much am I currently paying for Directors & Officers Liability at present?
- Why is Entity Cover so important?
Simple Answer: Failure to have Entity Cover included under your Directors & Officers Liability Insurance policy MEANS THAT YOU ARE ESSENTIALLY ONLY 50% COVERED.
Entity Cover provides cover the Management Company / Residents Association as an actual Entity.
In the event of a claim, the claimant will likely name the Management Company / Residents Association along with each individual Director / Officer as Defendants. If the claimant succeeds the court will apportion the settlement amounts against each of the Defendants.
Claimant decides to take a case against ABC Management Company, and Director A and Director B.
The claimant is successful and the total court award including legal fees amounts to €50,000.00. The court advises that 50% (€25,000.00) must be paid by ABC Management Company and the remaining 50% split between Director A and Director B (€12,500.00 each). Director A & B are covered by their Directors & Officers policy and insurers pay the €12,500.00 for which each Director is liable for.
If Entity Cover has not been included under the policy then ABC Management Company and its members are liable for the remaining €25,000.00. ABC Management Company have not got the funds to pay the €25,000.00 for which they are now liable.
ABC Management Company has only 10 members which then means that each member is liable to pay their contribution towards €25,000.00 i.e. €2,500.00 each!!
- Surely my existing insurance provider has ensured that Entity Cover is included under our existing policy?
– This cover is NOT automatically included as standard by the majority of insurers – it must be specifically requested.
– Many policies are being sold without this cover
– Most insurers apply a policy excess of €2,500.00 to €10,000.00 in respect of claims made against the Management Company / Residents Association, as an Entity
Residents Association / Management Company Proposal Forms