Why Directors & Officers Insurance Is Essential for Residential Property Block Directors

Directors of residential property blocks take on a critical role—often voluntarily—managing the day-to-day operations and finances on behalf of leaseholders. This includes handling service charges, overseeing maintenance, and making key decisions that affect the wellbeing of residents and the property itself. But despite their best efforts, these directors can be held personally liable for the decisions they make. This is where Directors & Officers (D&O) insurance becomes essential.

Why Do Residential Property Block Directors Need D&O Insurance?

When you serve as a director of a residential block management company, you assume legal responsibility for any claims made against that company—and potentially, against you personally.

If a leaseholder believes you have not acted correctly, they can bring legal action against you personally. This may include complaints around how service charges are used, decisions on maintenance, or handling of neighbour disputes and encroachments.

D&O insurance protects you in these scenarios by covering:

·         Legal defence costs

·         Settlements or awards

·         Other related expenses if a claim is made

Without this cover, you may be forced to pay out of your own pocket.

Key Considerations When Choosing D&O Insurance

Not all D&O policies are created equal. Here are some key things to keep in mind to ensure you’re properly protected:

1. Limit of Indemnity

This is a key consideration as this will be the total amount insurers will pay in the event on of a claim. Legal defence costs can escalate rapidly, especially in complex or prolonged cases. Be realistic about the risks and choose a sufficient limit to cover a worst-case scenario.

2. Aggregate vs. Per Claim Limits

Make sure you understand whether your policy provides:

·         Aggregate cover – one limit for all claims made in a policy year, or

·         Per claim cover – a separate limit for each individual claim.

If your policy only offers an aggregate limit and you face multiple claims in a single year, you could quickly exhaust your cover.

Real-World Example

A group of leaseholders brought a claim against their block’s directors over what they believed to be misuse of the service charges. The case went to the First Tier Tribunal, where they ultimately ruled that the directors had acted properly, the legal defence costs were more than £90,000. Luckily, a management liability policy was in place, with the insurer covering the defence costs as the case proceeded.  The D&O policy was crucial in protecting the directors during the process.

Final Thoughts: Protecting Yourself and Your Block

Being a director of a residential property block is a serious responsibility, even if it’s unpaid. Things can go wrong—even if you act in good faith—and legal claims can arise without warning.

D&O insurance isn’t just a box-ticking exercise. It’s your financial safety net. The right policy will give you peace of mind to carry out your duties, knowing you’re protected against personal financial loss.

Need Advice on D&O Insurance?

At Eggar Forrester, we specialise in helping residential block directors secure the right D&O insurance. From tailored advice and risk assessment to claims support, we’re here to help protect you and your block.