When I thought about running for my HOA Board of Directors more than ten years ago, I wanted to know how many members served on the board, how frequently we would meet and where and what my role would likely be on the board. I was elected to the board and served for two years.
Oddly enough, I never once asked before that election if we had Directors & Officers Coverage nor did I review the coverage-a rookie mistake for sure and not one I would ever repeat should I consider running for another board. Naturally, I assumed such coverage was in place and would be sufficient which was the case in my community but is not always the case in many other communities.
Of course, I deal with client questions pertaining to D&O coverage all the time. Often these relate to the wrongful acts of current or previous board members. Some of the more common questions I hear include:
- If a former association president signs a bad contract without doing any sort of due diligence on the contractor or obtaining competitive bids, can the remaining board members file a claim against the D&O policy?
- One of our directors has been sued for slander. Is he protected under our policy?
- We just discovered that our bookkeeper has a gambling problem and has frittered away common funds at the nearby casino. Will our D&O policy pay us for our losses connected to her activity?
- Are volunteers covered under our D&O policy if they commit wrongful acts? What about association employees?
- What is the difference between a claims-made policy and an occurrence policy and which is better for my association?
Endorsements can cover a wide range of activities and people but you need to know you need them in the first place! Start thinking about the types of activities that occur regularly in your community and the number of directors, officers, employees and volunteers you have and then purchase the coverage needed to protect all those people and address all those activities.
Scott Simmonds is an insurance consultant and a reader of this Blog who has created a handy primer on D&O coverage, breaking down these often complicated issues into easy-to-understand segments.
Scott has graciously created a link so readers of my CondoandHOALawBlog can download this material for free.
It is difficult enough to get people to volunteer to serve on association boards. You can make that decision a little easier by having the proper coverage in place. The proper coverage can also help your community recover a little quicker when a person in a position of trust in your community does not do the right thing.