C.V. from Connecticut writes:
Dear Mister Condo,
Can board members be sued along with the management company? Should board members carry extra insurance other than the standard policy already in force by association? Thank You!
Mister Condo replies:
C.V., that is a great question! I am not an attorney, so please accept my reply as friendly advice. You may wish to pose the same question to your association attorney for a proper legal answer. In today’s litigious society it is quite possible for Board Members as well as the Property Management company and even the Association as a whole to be sued. The association typically holds insurance policies that cover them for a wide range of possible lawsuits. Directors and Officers (D&O) is one of those policies and it covers Board Members for most typical lawsuits they might face in the performance of their duties. For most Board Members, that is enough coverage for peace of mind while serving as a volunteer member of Board of Directors. However, there have been cases where Board Members have made exceptionally poor decisions that can lead to criminal and/or personal lawsuits that are outside the scope of this coverage. I am not sure if any additional insurance coverage would have helped them but it may be worth a conversation with your personal agent, especially if you are quite well off and concerned that a personal lawsuit would be a burden worth insuring against. I have personally served on Boards for most of my adult condo life and I have never sought additional coverage. Then again, I have never been sued performing my duties as a Board Member and I can’t imagine any of my actions as a Board Member not being covered by the association’s D & O policy. That being said, I wouldn’t consider serving on a Board where the D & O policy wasn’t in place and kept current. All the best!
1 thought on “Condo Board D&O Dos and Don’ts”
Dear Mr. Condo:
I wish you and your readers a blessed holiday season. I agree with your response and would like to supplement it.
First, you are correct that board members can be sued along with managers and the management company. In fact, our Great country gives anyone the power to sue any one regardless of whether the lawsuit is frivolous, false or fraudulent. In fact we see that every day.
You are also correct that that most condo or single family HOAs have directors and officers insurance. HOWEVER, board members, managers and unit owners should not take complete comfort in the mere fact that the association has a D&O Policy, because not all D&O policies are created equal. In fact, some are substantially better than others.
First, the board should make sure that they use a community association insurance professional. Such a professional can be found on your CAI chapter website or through recommendations from other satisfied association boards. Shopping insurance means shopping for the community association insurance professional, not the best priced policy.
Second, insist that the insurance professional present their proposal directly to the board, because they are the insurance professional and can answer any questions. The board should request that the insurance professional not disclose the premium until ALL proposals are presented. This way they can determine the policy to protect the association assets. After you decide the ranking of the best policy to the worst, the. You can look at price. If you see price first, it will skew your analysis of coverage.
I will not go into keyncoverages to look for in this response. However, you want the association to obtain an umbrella liability policy that goes over the D&O policy.
Some personal umbrella policies provide additional coverage , but that is not critical in my opinion, because board members also have indemnity protection pursuant to the governing documents as long in most cases that their conduct is nor grossly negligent or willful. These D&O policies and the issues involved are different from for profit public and private company issues and policies which could very well warrant additional coverage. Again that is beyond this response.
I hope this is helpful.
Regards, Joel Meskin, ESQ., CIRMS, MLIS, CCAL Fellow