Question 1

Directors’ and Officers’ Liability

Accepted Answer

Q: Our questions are regarding our potentially signing up a third party managing agent to manage our block, specifically re the insurance implications. We have not yet signed the contract. The relevant Terms of Business (contract) excerpts from that supplied by the agent currently read:

The Client is not required to arrange and hold directors’ and officers’ liability insurance for the Term but is advised to do so. On request, the Client will give the Manager a copy of any such insurance certificate.
The Client shall indemnify the Manager in respect of any claims made by another or third party for any loss, damage or legal and other expenses incurred as a result of any one or more of those circumstances listed above.
The Manager shall not be liable to indemnify the Client in respect of any claims made by another or third party for any loss, injury, damage or legal or other expenses incurred as a result of any one or more of those circumstances listed above unless it be as a result of the Manager’s negligence.

1: The agent is advising that we have "directors’ and officers’ liability insurance”. Are you able to advise if this is sensible, and what we should look for in cover? 2: Currently we have cover in our buildings insurance under 'Property Owners Liability' which mentions indemnity cover for directors and officers. How does this differ from Directors’ and Officers’ Liability/Indemnity cover? 3: If we do engage an agent then they will arrange our buildings insurance for us. Would you advise that it is satisfactory to have a Directors’ and Officers’ Liability/Indemnity cover policy arranged by our building manager, or, would you advise that we the directors keep some independence and arrange such a policy ourselves? 4: Also, we have employer's liability cover and property owners’ liability cover with our buildings insurance. So in addition to Directors and Officers Liability/Indemnity cover, is there any other insurance cover that you suggest we could or should take out? (if we have appointed a managing agent or otherwise). FPRA Committee Member Bob Slee replies: I am responding as someone in a situation very similar to your own rather than as an insurance expert, which I'm not. When I became a director of a self-managed block I found it extremely useful to sit down with an insurance broker and discuss the various types of cover that are available through different policies and what we needed to ensure adequate protection. What follows is based on that advice - considered in context by my fellow directors and myself - and which has stood the test of time over many years. We concluded that Directors’ and Officers’ Liability (D&O) cover was essential. Volunteer directors regularly take decisions on the basis of their best judgement but not necessarily based on any particular professional expertise. In the best of situations things can sometimes go badly wrong and the actions of directors may be legally challenged which could be a hugely expensive business. D&O cover would provide protection in most circumstances. Property owners’ liability protection is usually included in a buildings insurance policy and is primarily intended to cover third party claims arising from defects in the building and grounds, which is quite different to claims arising from decisions and actions of the directors. In summary and in response to your specific questions:

In my view D&O cover is more than sensible. Standard policies are widely available and the only variable consideration is likely to be the monetary level of cover that you are prepared to pay for. We don’t employ managing agents these days but even when we did we held D&O cover separately from the arrangement we had with the agents - it is quite possible that a claim under the cover could arise in connection with your contractual arrangement with the agents.
Property owners’ liability cover is quite separate from D&O cover and intended for different risks.
I have personally never come across D&O cover being included in a buildings insurance policy.

However, some insurance companies offer preferential premiums if you buy both policies from them.

In most situations potential third party claims not covered by employer's liability or D&O cover would be covered by property owners’ liability cover in your buildings insurance. In our situation we have a good buildings insurance policy with built in property owners’ liability cover and separate D&O cover and we regard ourselves as being amply protected.

Question 2

Directors’ and Officers’ Liability

Accepted Answer

Q: Our questions are regarding our potentially signing up a third party managing agent to manage our block, specifically re the insurance implications. We have not yet signed the contract. The relevant Terms of Business (contract) excerpts from that supplied by the agent currently read:

The Client is not required to arrange and hold directors’ and officers’ liability insurance for the Term but is advised to do so. On request, the Client will give the Manager a copy of any such insurance certificate.
The Client shall indemnify the Manager in respect of any claims made by another or third party for any loss, damage or legal and other expenses incurred as a result of any one or more of those circumstances listed above.
The Manager shall not be liable to indemnify the Client in respect of any claims made by another or third party for any loss, injury, damage or legal or other expenses incurred as a result of any one or more of those circumstances listed above unless it be as a result of the Manager’s negligence.

1: The agent is advising that we have "directors’ and officers’ liability insurance”. Are you able to advise if this is sensible, and what we should look for in cover? 2: Currently we have cover in our buildings insurance under 'Property Owners Liability' which mentions indemnity cover for directors and officers. How does this differ from Directors’ and Officers’ Liability/Indemnity cover? 3: If we do engage an agent then they will arrange our buildings insurance for us. Would you advise that it is satisfactory to have a Directors’ and Officers’ Liability/Indemnity cover policy arranged by our building manager, or, would you advise that we the directors keep some independence and arrange such a policy ourselves? 4: Also, we have employer's liability cover and property owners’ liability cover with our buildings insurance. So in addition to Directors and Officers Liability/Indemnity cover, is there any other insurance cover that you suggest we could or should take out? (if we have appointed a managing agent or otherwise). FPRA Committee Member Bob Slee replies: I am responding as someone in a situation very similar to your own rather than as an insurance expert, which I'm not. When I became a director of a self-managed block I found it extremely useful to sit down with an insurance broker and discuss the various types of cover that are available through different policies and what we needed to ensure adequate protection. What follows is based on that advice - considered in context by my fellow directors and myself - and which has stood the test of time over many years. We concluded that Directors’ and Officers’ Liability (D&O) cover was essential. Volunteer directors regularly take decisions on the basis of their best judgement but not necessarily based on any particular professional expertise. In the best of situations things can sometimes go badly wrong and the actions of directors may be legally challenged which could be a hugely expensive business. D&O cover would provide protection in most circumstances. Property owners’ liability protection is usually included in a buildings insurance policy and is primarily intended to cover third party claims arising from defects in the building and grounds, which is quite different to claims arising from decisions and actions of the directors. In summary and in response to your specific questions:

In my view D&O cover is more than sensible. Standard policies are widely available and the only variable consideration is likely to be the monetary level of cover that you are prepared to pay for. We don’t employ managing agents these days but even when we did we held D&O cover separately from the arrangement we had with the agents - it is quite possible that a claim under the cover could arise in connection with your contractual arrangement with the agents.
Property owners’ liability cover is quite separate from D&O cover and intended for different risks.
I have personally never come across D&O cover being included in a buildings insurance policy.

However, some insurance companies offer preferential premiums if you buy both policies from them.

In most situations potential third party claims not covered by employer's liability or D&O cover would be covered by property owners’ liability cover in your buildings insurance. In our situation we have a good buildings insurance policy with built in property owners’ liability cover and separate D&O cover and we regard ourselves as being amply protected.

Directors’ and Officers’ Liability

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