R.J. from New Haven County writes:
Dear Mister Condo,
My condo association was involved in a lawsuit this past year which was recently settled through arbitration. The association’s defense was funded by the association’s insurance company. The dispute was over the assessment of cost to repair retaining wall and meaning of association’s declaration. The finding split financial responsibility 50/50. The Board unanimously voted to allow the Association’s insurance carrier to settle the complaint against the association as recommended in the arbitrator’s decision.
What type of insurance covers this claim? Was this a D & O claim? Was this some other “Liability Claim?
Mister Condo replies:
R.J., when it comes to advanced insurance issues like yours, I turn to an insurance expert for an opinion. I shared your initial correspondence to me and here is the response offered:
“If there was a lawsuit against the Board for failure to properly follow the declarations or failure to enforce rules and regulations, then this would be a claim against the Association’s Directors and Officers policy. If the nature of the complaint involved bodily injury or damage to real or personal property owned by the Association, then the Association’s package policy would likely respond.
Generally, the D&O policy will come into play when a third party (typically unit owner) is harmed in some manner, other than physical injury, as a direct result of an action or lack thereof by the Board of Directors. In this case, costs to repair real property that is not covered by the Association or that the association chooses to self-insure can be assessed by the Board of Directors to the unit owners but such an assessment must be levied in accordance with the Association’s declaration. A dispute arising as a result of the Board’s failure to properly implement such as assessment would likely be handled by the Association’s D&O carrier as this involves a failure to properly adhere to the Association’s governing documents.”
That sounds like a good answer to me, R.J.. All the best to you and your association!