Every director and officer of a homeowner association board has personal responsibility for HOA business. The basic purpose of Directors and Officers insurance is to protect directors and officers from claims made because of wrongful (or allegedly wrongful) acts or omissions made while acting in their individual or collective capacity on behalf of the homeowners association.
General liability insurance will not protect directors and officers in the same way. This insurance is to cover against third party bodily injury and property damage. Directors and Officers insurance covers against third party financial damages and other claims not covered under General liability.
Here's a list of scenarios in which directors and officers have liability:
Continuing a wrongful practice after learning it's wrong
Libel or slander
Failing to pay HOA debts in a timely manner
Improper management resulting in losses
Receiving personal gain while performing as director or officer
Making decisions based on adequate information and advised judgment
Ignorance of HOA books and records
Verifying content of official documents before signing
Obedience to the governing documents
Self dealing
Aiding and abetting illegal actions of others
Conflict of interest
Carelessness in conducting business or legal matters
Failing to see what could be seen by merely looking
Inducing intentional or careless wrongdoing
Ignoring statutory or regulatory requirements
Insufficient oversight of officers or employees
Nondisclosure of questionable or unlawful actions
Willful wrongdoing
Because of all these traps and pitfalls a director or officer could fall into, D&O insurance should never be optional. No one should serve on a board without it unless, of course, you have absolutely nothing to lose. I personally don't know one person that doesn't. Do D&O.
What is a condo association master insurance policy?