Many Associations operate by a select number of ‘elected homeowners’, volunteering to help run and make decisions on behalf of the entire Association. While most HOA’s have general liability insurance coverage that covers slip and fall accidents and personal injury due to an association’s negligence, additional Directors and Officers (D&O) coverage protects each member on the Board and the “perceived” negligence due to their decisions.
Although your Board normally serves the Association with your best intentions, not every homeowner will be satisfied with the decisions made, and lawsuits may occur. Because of your Board’s vast responsibilities which directly affect the homeowners, such as determining budgets, enforcing the CC&R’s, collecting dues, and maintaining the common areas, it’s important that your HOA has comprehensive D&O coverage to protect your Board.
Lawsuits often name one or more Board members or other individuals involved in the case, it’s important that the D&O coverage include not only your present Board but past Board members, volunteers, spouses and partners, and the HOA’s Property Management company if the board has one. Regardless of the legitimacy of a lawsuit, without D&O coverage, your Board members could end up owing a large judgement, required to pay for sizable expenses or damages. Even if the claim is settled, dismissed or negotiated, the legal fees to defend the case could be sizable for any of the Board members involved.
It’s important to understand that Directors and Officers coverage varies from insurance company to insurance company. Don’t just look at the premium! To determine if your Board of Directors are covered, the first step is to review and understand what types of coverage are provided in your Association’s policy.
Important topics to determine are:
- What is an insured -vs- insured exclusion?
- Are the defense costs outside the limit of insurance?
- Are there defense costs for discrimination lawsuits?
- What is full prior acts coverage?
It’s better to be Proactive than Reactive. Now is the time to take action. Don’t make the costly mistake of discovering your Board members aren’t covered until after a lawsuit is filed. With one quick phone call to ABI Insurance, you will be taking the first step in protecting your Board BEFORE a lawsuit happens, avoiding costly mistakes.
Ask to speak with Vern or Sara, who understand the complex insurance coverage needs of your HOA and Board. Call ABI today!