Condominium boards and homeowner associations are responsible to act in the best interest of owners in the community. Often this requires making difficult decisions. These decisions can affect other owners or people doing business with the association. If a dispute arises over a decision, board members can be sued, along with the association. Just about everyone has something to lose in a lawsuit. Having the proper insurance coverage is key to protecting one’s assets while serving on a board. However, there may be some confusion when it comes to one type of policy- Directors and Officers Insurance.
What is D & O Insurance?
Separate from business liability insurance, Directors and Officers Insurance (often called D & O), indemnifies (reimburses) directors and officers of the association, or the association itself, in the event that legal action is brought for alleged wrongful acts while people are serving on the association board of directors. However, intentional illegal acts are typically not covered by such policies.
This small portion of an association’s overall insurance package is often overlooked, or some assume it is included in general liability insurance.
An insurance agent that deals with other types of home owner association policies likely will bring up this coverage when working with an association. If not, ask! It is critical to put it in place, and many savvy directors would not serve on a board without it.
To make sure your association gets the right coverage, make sure to ask potential agents questions that cover your association’s specific situation, including:
Is the policy an embedded, or stand alone policy
Does the policy extend to volunteers & employees
Will it cover spouse of directors and officers
Will it provide defense above the stated limits
Does it cover both monetary and non-monetary
Does it cover a property manager
Will it cover failure to maintain adequate insurance
Will it cover libel and slander
Will it cover discrimination
Will it cover improper management
Will it cover breach of contract coverage
Review bids carefully. Sometimes the low bid is not the best. Make sure you have coverage for everything you need.
Report claims right away
When a claim is filed against a director or the association, contact your insurer promptly, according to the reporting policies in the insurance document. Failure to report in a timely way may mean a claim is disallowed.
Review your D & O policy on the same schedule you review the other insurances of the association. Having good D & O coverage in place is not only good protection, it may help you attract and retain quality board members.