Absolutely! But what is it?

Directors and officers insurance protects volunteer board members from mistakes or errors they make in governing their associations. This insurance is sometimes called “D&O” or professional liability insurance and typically is a part of many “packaged” insurance sales to associations. The other parts of the package will be general liability and for condominiums or townhomes, casualty insurance. Additional insurance coverage purchased by associations may include special endorsements, workers compensation and fidelity insurance for volunteers and/or management (to protect funds of the association). This article reviews D&O insurance.

Our association has “D&O” insurance, so we’re okay. Right?

Probably not. Most associations do not have D&O policies with the coverage they need. There are significant differences in the extent of coverage under the many forms of D&O insurance. If your association’s coverage is a part of a “package” from your casualty insurance or agent, you may not have the best available coverage. Nationally known insurance carriers offer good property and general liability coverage, but their D&O coverage is typically inadequate. Better coverage is definitely available and at a reasonable cost. If your association has D&O insurance as part of a packaged policy the association can still elect to drop the D&O coverage and add it through one of the specialty D&O carriers.

What are the key D&O coverages associations should have?

There are many. Here are several. Coverage should extend beyond the association or the named “insureds.” Coverage should also extend to:

• past directors and officers
• committee members and volunteers
• the association itself
• subsidiaries of the association
• the managing agent
• developer appointed board members

 Coverage should include defense and indemnity. Many “package” policies do not cover defense, they only “indemnify” if the association is found liable. The definition of a “loss” should include the costs (including attorney fees) to defend the lawsuit.

Other coverages of a good D&O policy:

• coverage should be provided for failure to maintain the correct or sufficient insurance
• coverage for non-monetary claims such as injunctive relief
• coverage for claims involving allegations of discrimination
• defense costs for breach of contract
• coverage for wrongful employment practices

What should an association do to determine if its D&O coverage is adequate?

Consult with your association’s attorney on insurance agent or broker with experience and knowledge concerning D&O policies.

Risk exposure can be insured with the right policy.

Claims and lawsuits against owner associations and their leaders are only limited by the creativity of those who sue associations. Today, where people have no qualms about suing their neighbors, especially their association, proper insurance protection is needed. The good news is adequate D&O insurance is available. The bad is most associations do not have it. Change this in your community. Get the D&O insurance protection you need and deserve.