RTM directors’ insurance obligations: your complete guide

There is no general statutory duty requiring an RTM company to hold directors’ and officers’ (D&O) insurance. That said, any RTM director who serves without it is taking a personal financial risk that most boards, once they understand it, choose not to accept. The practical expectation across the sector is clear: D&O is standard protection for volunteer directors managing a residential block.

Three things your board should do this week:

1. Pull out your company’s articles of association and any relevant lease terms to check whether insurance obligations are already prescribed.
2. Confirm that buildings insurance is in place and that the RTM company is correctly named as an insured party.
3. Obtain a D&O quotation if your board faces any exposure from financial oversight, maintenance decisions, or leaseholder disputes.

Legal caveat: statutory duties on RTM company directors are set out under the Companies Act 2006 and the Right to Manage Regulations 2003, SI 2003/2120. Always consult those primary sources or a qualified solicitor for precise statutory detail.

Key takeaways

RTM directors face genuine personal liability for board decisions, and D&O insurance is the standard protection the sector expects, even where no statute directly compels it.

Table of Contents

• What directors’ and officers’ (D&O) insurance actually does
• Are RTM companies legally required to hold D&O?
• Who should be covered on a D&O policy?
• What D&O typically covers and what it excludes
• What D&O costs and how limits are set
• How to arrange D&O cover: a step-by-step checklist
• How D&O fits with your other policies
• What to do when a complaint or claim arrives
• Why a specialist broker makes a real difference for RTM boards
• Flatinsurance can arrange your RTM D&O cover quickly
• Sources

What directors’ and officers’ (D&O) insurance actually does

D&O insurance pays the legal costs and financial consequences when a director or officer of a company faces a claim arising from a decision made in their capacity as a board member. For an RTM company, the insured parties are typically the company itself and every current director, with most policies extending automatically to past directors as well.

The loss types covered fall into three broad categories: defence costs (legal fees to contest a claim), civil liability (compensation or damages awarded against a director), and investigation costs (responding to regulatory or tribunal enquiries). What D&O does not cover is physical damage to the building or injury to a third party in a communal area. Those risks sit with buildings insurance and property owners’ liability respectively.

A common scenario: the board approves a major repair programme without following the correct Section 20 consultation process. A leaseholder challenges the decision at the First-tier Tribunal, naming individual directors. Without D&O, each director funds their own legal defence personally.

That distinction between D&O and buildings cover trips up many new RTM boards. D&O is not a substitute for buildings insurance, and it is not the same as a managing agent’s professional indemnity policy. Each policy covers a different category of loss, and gaps between them are where the real exposure sits.

Are RTM companies legally required to hold D&O?

No statute directly compels an RTM company to purchase D&O insurance. The insurance obligations for RTM directors arise from three sources instead: company articles, lease terms, and practical governance expectations.

The RTM Companies (Memorandum and Articles of Association) (England) Regulations 2009, SI 2009/2767 set out model articles that make express provision for insuring the premises and insurable interests. Where a company has adopted these model articles, the obligation to maintain appropriate insurance is built into the company’s own constitution. Lease terms can go further still, specifying the types of cover required and even minimum limits.

Documents the board should inspect immediately:

• Articles of association (check for express insurance obligations and any indemnity provisions for directors)
• Each residential lease (look for insurance covenants and definitions of insured risks)
• The service-charge budget and schedule (confirm whether D&O premiums are already included)
• The managing-agent contract (check whether the agent holds its own professional indemnity and whether D&O is separately required)
• Companies House filings (confirm the company is correctly constituted as a private company limited by guarantee)
• Any transfer documents from the previous landlord or management company

As LexisNexis practice guidance confirms, an RTM company must be a private company limited by guarantee, and both the articles and lease terms determine whether the RTM company should be the insured under buildings cover. The same principle applies when assessing whether D&O is expected or required: the answer is almost always in those documents.

Who should be covered on a D&O policy?

The short answer is everyone who acts in a decision-making capacity for the RTM company, including people who have already left the board.

Most D&O policies for RTM companies are structured as entity policies, meaning the company itself is named alongside all current directors and officers. The better wordings extend this automatically to past, present, and future directors without requiring individual endorsements at each renewal. That automatic breadth matters because a claim can arrive years after the decision that triggered it.

Run-off cover is the piece most boards forget. When a director resigns, their exposure to claims for decisions made during their tenure does not end. Run-off (or “tail”) cover extends the policy’s protection for departing directors, typically for six years, though availability and automatic inclusion vary by insurer and must be confirmed at renewal.

Pro Tip: Ask your broker explicitly whether run-off cover is included automatically or whether it requires a separate endorsement. Some policies only trigger run-off if the company ceases to trade entirely, which leaves a resigning director unprotected.

The question of whether to include managing agents on the same policy requires care. A managing agent should hold its own professional indemnity cover for errors in its management role. Including the agent on the RTM company’s D&O policy can create conflicts of interest if a claim involves both parties. The cleaner approach is to verify the agent’s own PI cover separately and keep the RTM D&O policy focused on the company and its directors.

What D&O typically covers and what it excludes

Typical cover elements:

• Defence costs, including legal fees and counsel’s fees, usually paid on an “as incurred” basis rather than after the case concludes
• Civil liability for wrongful acts, including breach of duty, neglect, error, or misleading statements made in a director’s capacity
• Regulatory and tribunal investigation costs (for example, First-tier Tribunal proceedings or Companies House enquiries)
• Employment disputes where a director is named personally (subject to policy wording)
• Entity cover for the RTM company itself where the company faces a civil claim alongside individual directors

Common exclusions to watch for:

• Fraud, dishonesty, and deliberate criminal acts (though defence costs are often covered until a court finds against the director)
• Contractual fines, penalties, and punitive damages
• Bodily injury and property damage (these sit with buildings insurance and property owners’ liability)
• Claims arising from circumstances known before the policy incepted
• Insolvency-related claims in some wordings

Three policy clauses every RTM director should check:

1. The insuring clause: does it cover “wrongful acts” broadly, or is it narrowly defined? A broad definition is preferable.
2. The defence costs basis: are costs paid as incurred, or only after the outcome is determined? “As incurred” is the standard you want.
3. The allocation clause: if a claim involves both insured and uninsured parties, how are defence costs split? A favourable allocation clause protects the director’s share.

What D&O costs and how limits are set

D&O premiums for RTM companies vary considerably, but advisory guidance for RMC and RTM directors indicates that premiums for small blocks often start at a few hundred pounds per year, rising with the size and risk profile of the building. For a small block of six to twelve flats with a clean claims history, a limit of £250,000 to £500,000 is a reasonable starting point. Larger blocks, or those with building-safety complexity, typically warrant limits of £1 million or more.

Factors that drive the premium up:

• Number of units and overall block size
• Claims history, including any leaseholder disputes or tribunal proceedings
• Whether the building is over 18 metres (bringing additional building-safety obligations under the Building Safety Act 2022)
• The level of reserves held and whether service-charge accounts are up to date
• Previous Section 20 consultation failures or ongoing disputes
• Mixed-use elements or complex ownership structures

Pro Tip: D&O premiums are generally recoverable through the service charge and do not typically trigger Section 20 consultation as a qualifying long-term agreement. Record the premium as a distinct line item in the service-charge budget and AGM papers to maintain transparency with leaseholders.

The policy excess (or retention) is the amount the company bears before the insurer pays. For RTM D&O policies, a nil or low excess on defence costs is preferable, since legal fees accumulate quickly even in straightforward disputes.

How to arrange D&O cover: a step-by-step checklist

Getting a D&O quotation for an RTM company is straightforward when the board has the right documents ready. Underwriters are assessing the governance quality of the company as much as the physical risk of the building.

Steps to obtain a quotation:

1. Pass a board resolution confirming the intention to arrange D&O cover and record it in the minutes.
2. Gather the company’s articles of association, the most recent set of filed accounts, and the last two years of board minutes.
3. Compile a claims history: any tribunal proceedings, leaseholder disputes, Section 20 challenges, or regulatory enquiries in the past five years.
4. Obtain a current rebuild cost assessment (RCA) prepared by a RICS-qualified surveyor. Underwriters for buildings cover will require this, and it supports the overall risk picture for D&O as well.
5. Confirm the managing-agent contract and the agent’s own PI cover limits.
6. Contact a specialist block-of-flats broker with the above documents and request a formal quotation.

Questions to ask the broker or insurer at quote stage:

• What is the precise definition of “wrongful act” in this policy?
• Are defence costs paid as incurred or only after the outcome?
• Is run-off cover included automatically for departing directors, and for how long?
• Who is named as an insured: the company, all current directors, and past directors?
• Does the policy include entity cover for the RTM company itself?
• How does the allocation clause work if a claim involves both insured and uninsured parties?
• What is the excess on defence costs versus compensation claims?
• Are employment disputes covered, and is there a sub-limit?
• How are claims reported and who handles them?
• What is the insurer’s appetite for building-safety-related claims?
• Is the policy claims-made or occurrence-based?
• What circumstances must be notified even if no claim has yet been made?
• Are there any exclusions specific to RTM companies or leasehold disputes?
• What documents will the insurer require at renewal?
• Can the limit be increased mid-term if a significant dispute arises?

For the underwriter’s file, also prepare: the service-charge budget and accounts for the last two years, details of any Section 20 consultations in progress, a summary of any building-safety works planned or completed, and a copy of the managing-agent contract.

How D&O fits with your other policies

RTM directors often ask whether D&O overlaps with buildings insurance or property owners’ liability. It does not, but the boundaries matter.

The LexisNexis guidance is explicit that articles and lease terms determine whether the RTM company should be the insured under buildings cover. Getting that named-insured question wrong creates a gap that neither buildings insurance nor D&O will fill.

The most common gap: an RTM company arranges buildings insurance but names the freeholder rather than itself as the insured party. When a leaseholder claims against the RTM company for a maintenance failure, neither the buildings policy nor the D&O policy responds cleanly. Checking the named insured on every policy at inception is a five-minute task that prevents a six-figure problem.

For property owners’ liability, the RTM company should be named as an insured party alongside any managing agent. D&O sits on top of this as a separate layer covering the directors personally. The two policies are complementary, not interchangeable.

D&O premiums are generally recoverable through the service charge. Gov is relevant here: smaller RTM companies filing under micro-entity or small-company rules should record D&O premiums as a distinct service-charge line item in their accounts to maintain transparency with leaseholders and auditors.

What to do when a complaint or claim arrives

Speed and documentation are the two things that determine whether a D&O claim is handled well or badly.

Immediate incident response:

1. Do not admit liability or make any statement about the dispute without legal advice.
2. Notify your D&O insurer or broker as soon as you become aware of a claim or a circumstance that could give rise to one. Most D&O policies are claims-made, meaning the claim must be notified during the policy period.
3. Preserve all relevant documents: board minutes, correspondence, service-charge records, maintenance logs, and any communications with the leaseholder or their solicitor.
4. Appoint a single point of contact on the board to manage communications with the insurer and legal advisers.
5. Check whether the managing agent has been notified and whether their PI insurer needs to be involved.
6. Record the notification in the board minutes with the date and the name of the person who made it.

Longer-term governance controls that reduce claims risk:

• Keep board minutes detailed and accurate: record decisions, the reasoning behind them, and any dissenting views.
• Maintain a conflicts-of-interest register and update it at every meeting.
• Set delegated authority limits so no single director can commit the company to significant expenditure without board approval.
• Conduct an annual compliance review covering building-safety obligations, fire risk assessments, and service-charge accounting.
• Keep building-safety records up to date, particularly for buildings over 11 metres.

Pro Tip: Late notification is the single most common reason D&O claims are declined or disputed. If you receive a solicitor’s letter, a formal complaint, or even an unusually aggressive leaseholder email that hints at legal action, notify your insurer that day. You do not need a formal claim to trigger a notification obligation under most policies.

Why a specialist broker makes a real difference for RTM boards

A general insurance broker can place a D&O policy. A specialist block-of-flats broker places one that actually fits the exposures an RTM board faces.

What a specialist broker brings to an RTM D&O placement:

• Policy wording tailored to RTM-specific exposures: leasehold disputes, Section 20 challenges, building-safety obligations, and First-tier Tribunal proceedings
• Access to insurers with genuine appetite for RTM and RMC risks, rather than standard commercial D&O markets that may exclude leasehold-related claims
• Rebuild cost assessment support through RICS-qualified surveyors, ensuring buildings cover sits on the correct sum insured and does not create gaps that affect the overall risk picture
• Liaison with managing agents to confirm PI cover and avoid overlaps or conflicts between policies
• Claims management support from people who understand the leasehold sector

Flatinsurance’s position in this market: as a specialist broker focused exclusively on blocks of flats, Flatinsurance works with RTM companies across the UK to place bespoke D&O cover alongside buildings insurance and property owners’ liability. The in-house RICS-qualified surveyors provide rebuild cost assessments that underpin the buildings policy and support the overall governance picture that D&O underwriters assess.

For RTM boards arranging cover for the first time, or reviewing existing policies after a change in directors or a building-safety event, a specialist broker shortens the process considerably. The right questions get asked at quote stage, the wording gets checked before the policy is bound, and the board has a clear record of having taken professional advice, which itself reduces governance risk.

A note on why this matters more than most boards realise

Most RTM directors are leaseholders who volunteered to take on a management role. They did not sign up to be personally liable for decisions made in good faith about roof repairs or service-charge allocations. But that is exactly the exposure they carry without D&O cover, and the leasehold sector generates more disputes per square metre than almost any other area of property management.

The governance burden on RTM boards has grown since the Building Safety Act 2022 came into force. Directors of buildings over 11 metres now carry additional compliance obligations, and the consequences of getting them wrong are more visible than they were five years ago. D&O is not a luxury for larger blocks. For a few hundred pounds a year, it protects every director personally and gives the board the confidence to make decisions without the fear of personal financial exposure.

My recommendation, as someone who works in this sector: arrange D&O before the first board meeting, not after the first dispute.

Flatinsurance can arrange your RTM D&O cover quickly

RTM directors who need D&O cover arranged efficiently will find that Flatinsurance’s specialist focus on blocks of flats makes the process considerably faster than going to a general broker. The team understands RTM-specific exposures, asks the right questions at quote stage, and checks policy wording before it is bound.

When you contact Flatinsurance, you can expect a quotation within a few working days once the standard documents are provided: company articles, recent accounts, claims history, and details of the block. The team also offers rebuild cost assessment referrals through in-house RICS-qualified surveyors, ensuring your buildings cover sits on the correct sum insured alongside your D&O policy.

For RTM boards arranging cover for the first time or reviewing existing policies, the RTM insurance page sets out the full range of cover available. To request a tailored D&O quotation, visit the block of flats insurance page and get in touch with the specialist team directly.

Sources

The sources below cover the statutory framework, company reporting obligations, and specialist guidance for RTM boards. Use the legislation links for precise statutory text, the gov.uk link for accounts filing, and the Flatinsurance pages for practical cover arrangements.

• Annual accounts: micro-entities, small and dormant companies
• Where a right to manage (RTM) company has exercised the right to manage they are arranging buildings
• The Right to Manage Regulations 2003, SI 2003/2120

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