Residents of a block of apartments or other residential type property may have formed a management committee or perhaps a more formal Residents Association company to oversee the running of their building. The members of such a committee or association may act in the capacity of a Director, Company Secretary, Trustee, Non-Executive Director or other similar “Officer” role. Usually people are not paid in these roles.
If you are appointed as a Director of Officer of the Management Company of your apartment block you are really being appointed into a position of trust. So with this position you will be liable for any acts which are negligent or outside your authority or possibly in breach of your responsibilities.
Directors and Officers should be aware that they can be personally liable for their acts and sometimes the implication of a negligent act can have serious financial consequences.
Responsibilities include the need to ensure that:
• The property is safe and any lifts are regularly inspected to meet statutory requirements
(compliance with Health & Safety legislation)
• Any contractors used to carry out maintenance at the property, do so properly
• The finances are in order as the resident can be held personally liable for the debts of a
company if “he knew or ought to have known that there was no reasonable prospect that the
company would avoid going into insolvent liquidation”.
The law does not distinguish between the director of a residents association and that of a major
corporation. Ignorance of the law is no defence, so it is important for any resident wishing to take a
position of responsibility, to know the liabilities that they face. Especially as these liabilities may be
The Types of Exposures
• Health & Safety – fire safety, electrical and mechanical equipment checks
• Insolvency Act (wrongful trading)
• Companies Act 1963-2009
• Disability Discrimination Act
• Dishonesty to fellow directors
• Failure to supervise
• Racial and sexual discrimination
• EU directives and regulations
The above are all good reasons on why you need Directors and Officers insurance for sitting as a board member or acting as an officer of these organizations.
Typically what is covered by a Directors and Officers 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 will cover defence costs and if a director or resident association committee member was
found to be neglectful of their duties, damages would be awarded. (The policy will not respond to
fines, penalties and punitive or exemplary charges).
The above is a summary only – but all polices are subject to terms limits and conditions – Also you choose the limit you require for policy cover – starting limits would be €250,000.
Claims Examples (provided courtesy of W R Berkley Insurance)
1. An unruly family bought a flat in an otherwise select block. The owner of an adjacent flat immediately put her property on the market and alleged that she had been forced to sell for €20,000 less than the true price. She is suing the Chairman and Secretary of the management company on the grounds that they have failed to discipline the family, who had clearly intimidated them.
2. A management committee was held personally liable for failure to appoint a responsible builder to re-roof a large block of flats. The firm concerned botched the job and went into liquidation shortly afterwards. The work was so poor that most of it had to be done again.
3. Residents of an apartment building made a claim against the trustees of their residents association alleging that they had misused funds collected from the residents. The residents claimed this meant they had to pay additional money to the association.
4. Residents made a claims against the trustees of their residents association alleging they had failed to implement correct safety procedures following investigation by the Health & Safety Authority.
5. A prospective employee (gardener) at an apartment block made a claim against an individual trustee of the residents association after they were unsuccessful in gaining employment. The prospective employee alleged that they had not been employed because of their race.