HOA Insurance - Directors and Officers (D&O) Liability Insurance

stephen polinsky on Feb 4, 2009 11:10:00 AM

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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?

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