Directors and officers insurance is one of the few things in block management that is genuinely optional. No statute requires an RMC or RTM company to hold it. Yet it is the cover directors are most quietly anxious about, and rightly so, because the moment you accept a directorship you become personally exposed in a way most volunteers never quite register. This article gives a straight answer: who actually needs it, the situations where directors get sued, why a clause in your articles is not a substitute, and what cover costs in 2026.
Most people who become directors of a Residents Management Company (RMC) or a Right to Manage (RTM) company do so reluctantly, as a neighbour stepping up, not as a professional taking on a role. It is easy to assume that because the company is a separate legal entity, the company carries the risk and you do not. That assumption is half right and dangerously incomplete. The company is indeed a separate legal person, but the duties you take on are personal, and so is the exposure when something goes wrong.
The short answer first
D&O insurance is not required by law. There is no provision in the Companies Act 2006, in any lease, or in any leasehold statute that obliges an RMC or RTM company to buy it. So if the question is "must we have it", the answer is no.
But that is the wrong question. The right question is "are we personally exposed without it", and there the answer is yes. The cover is cheap, the exposure is real, and the gap between the two is what makes D&O one of the easiest decisions a board will make. The rest of this article is about understanding the exposure well enough to size the cover sensibly, rather than buying the first policy a broker emails over.
Why you are personally exposed in the first place
When you are appointed a director, you take on the seven general statutory duties set out in sections 171 to 177 of the Companies Act 2006. These are owed by you, personally, to the company. They are the same duties owed by the director of any company, large or small, paid or unpaid. They include the duty to act within your powers (s171), to promote the success of the company (s172), to exercise independent judgement (s173), to avoid conflicts of interest (s175), and to declare interests in proposed transactions (s177).
The one that catches volunteer directors most often is section 174, the duty to exercise reasonable care, skill and diligence. It applies a dual test. You are measured against the general knowledge, skill and experience that may reasonably be expected of anyone carrying out your functions as a director, and separately against the knowledge and experience that you actually have. The first limb is the trap: being an unpaid neighbour who never asked for the job does not lower the objective standard. The law expects a director to behave like a reasonably diligent director, full stop.
The company is a separate legal person, but your duties under the Companies Act are personal to you. "I was only a volunteer" is not a defence the law recognises. That gap, between how seriously the duties are taken and how seriously most directors take them, is exactly what D&O insurance exists to bridge.
What D&O insurance actually covers
A directors and officers policy covers the legal costs of defending a claim against you in your capacity as a director or officer, and any damages or settlement you are ordered or agree to pay, for an alleged "wrongful act" in running the company. In a block context that typically means alleged breach of duty, mismanagement of service charge funds, breach of the company's obligations under the lease, health and safety failures, employment claims, and defamation arising out of disputes between the board and residents.
The part directors underestimate is defence costs. You do not have to lose a claim, or even have done anything wrong, to spend serious money. A leaseholder who is simply angry can issue a claim or threaten one, and you will need a solicitor to respond whether or not the claim has merit. A good D&O policy funds that defence from the first letter. Most of the value in the cover is in claims that never reach a courtroom.
Importantly, it is the company that buys and holds the policy, for the benefit of its current and former directors and officers. The Companies Act expressly permits this. Section 233 carves out insurance from the general bar on companies protecting their directors, so an RMC or RTM company purchasing and maintaining D&O cover for its board is doing something the legislation specifically anticipates and allows.
The situations where directors actually get sued
The abstract risk becomes a lot more concrete once you look at the claim types that actually arise on small residential blocks. These are the scenarios specialist insurers and brokers see repeatedly.
1. A leaseholder challenges how the money was handled
A leaseholder alleges the board set an unreasonable service charge, spent the reserve fund improperly, failed to consult on major works, or simply mismanaged the company's finances. Even where the board acted in good faith, defending the allegation costs money, and a finding of breach of duty can expose directors personally. Service charge disputes are the bread and butter of leasehold litigation, and the company's officers are an obvious target when a leaseholder is determined.
2. A safety or building failure
Someone is injured in the common parts, or a fire safety, electrical or structural failure causes loss, and the question becomes whether the directors discharged their duties properly. Since the wave of post-Grenfell fire safety duties landed on the "Responsible Person", boards carry far more named operational responsibility than they did a decade ago. A claim that the board failed to act on a known risk goes straight to the directors.
3. Employment and contractor disputes
If the company directly employs anyone, a caretaker, a cleaner, a gardener, it can face employment claims, and directors can be drawn in. Contractor disputes, including allegations of negligent appointment or paying a contractor who then disappears, also surface against the officers who made the decision.
4. Disputes between directors and residents
Small blocks are small communities, and relationships sour. Defamation claims arising from a heated exchange at an AGM or in a residents' WhatsApp group, allegations that a director acted out of personal interest, or a faction of leaseholders seeking to remove and sue the board, all happen. These are the claims that feel personal, because they are, and they are exactly where directors most want their defence funded for them.
Why a clause in your articles is not enough
A common board response is "the company will indemnify us, it says so in our articles". This is where directors are most often wrong, and it is worth understanding precisely why.
Section 232 of the Companies Act 2006 makes void any provision that purports to indemnify a director against liability for their own negligence, default, breach of duty or breach of trust in relation to the company. So a clause that simply says "the company indemnifies its directors against all liability" does not do what directors think it does. The company cannot, in law, indemnify you for breaching your duty to it.
There is a narrow, specific exception. Section 234 permits a "qualifying third party indemnity provision", an indemnity against liabilities owed to third parties rather than to the company itself. But even that cannot cover everything. A qualifying indemnity cannot pay a fine imposed in criminal proceedings, cannot pay a penalty owed to a regulator, and cannot cover the director's defence costs where they are convicted in criminal proceedings, lose civil proceedings brought by the company, or are refused relief by the court (once that result is final). The indemnity, in other words, has holes in exactly the places a worried director cares about.
And there is a more basic problem. An indemnity from the company is only worth as much as the company can actually pay. A small RMC with a few thousand pounds in its reserve cannot fund a five or six figure legal defence, however generously its articles are worded. An indemnity is a promise from an entity with a modest bank balance. Insurance is a covenant from an insurer with a balance sheet built to pay claims. That is why section 233 sits alongside section 232: Parliament closed the indemnity door and pointed directors at the insurance one.
What it costs in 2026
The reassuring part. D&O cover for a residential block is among the cheapest insurance a company will buy, because the sums at stake are small relative to commercial directors' policies, and premiums are usually calculated on the number of units. The figures below are indicative 2026 starting premiums quoted by specialist leasehold brokers and will vary with your indemnity limit, claims history, location and the company's activities. Treat them as a sense of scale, not a quote.
For most small blocks, a year of D&O cover costs less than a single hour of a solicitor's time. Whether the premium is paid by the company from its own funds or recovered through the service charge depends on what your lease permits, so check the lease before you assume it is a recoverable service charge cost rather than a company expense.
What good cover looks like
If you decide to buy, the policy is worth reading rather than filing. Four things matter more than the headline price.
The four checks before you bind a policy
- The policy is in the company's name and covers all directors and officers, current and former, not a single named individual. Cover that names one person leaves the rest of the board exposed.
- The limit of indemnity is realistic. A £100,000 limit is a starting point, but defence costs plus damages on a serious dispute can run higher. Consider whether the limit is enough for your block's value and risk profile.
- Run-off cover exists. Claims often arrive after a director has stepped down, sometimes years later. Check the policy responds to claims made after you leave, for acts while you were in office, and understand what happens if the company later lets the cover lapse.
- You understand the exclusions. Employment claims, claims already known about, and deliberate or dishonest acts are commonly excluded or sub-limited. Know what is not covered before you rely on the policy.
So, do you need it?
You are not legally required to have D&O insurance. But you take on real personal duties the moment you become a director, the company cannot lawfully indemnify you against the worst of the exposure, and the cover that closes the gap costs less than most blocks spend on a single communal repair. For a self-managed block, that maths is hard to argue with. The honest position is that D&O is optional in the way a smoke alarm is optional: nothing forces you to fit one, and you will be very glad you did on the day it earns its keep.
Not sure where your block's liabilities really sit?
The free Modbury Remote Compliance Score maps the core obligations on your block, the ones that, left unmanaged, turn into the claims D&O exists to defend. A 15-question quiz, a personal score, a list of gaps with statute references, and an estimated cost to close them. No payment, no sales call.
If you want the underlying compliance properly mapped, the Block Compliance Check goes deeper, with a review by TPI and RICS qualified members of the team, a full compliance register for your block, and a templates pack covering Section 20 notices, AGM agendas, fire safety records and the rest. From £149. And if you would rather hand the whole administrative layer over, that is what the core Modbury Remote service is for.
This article is general guidance for directors of self-managed blocks, not legal, financial or insurance advice. Premium figures are indicative, vary by insurer and circumstances, and are not a quote. Whether D&O cover is right for your block, and on what terms, depends on your specific situation; take advice from a regulated insurance broker and read the director duties in full at legislation.gov.uk.