The Importance of D&O Coverage

Condo association boardAbout one in six Americans live in an association-managed community, according to the Community Association Institute (CAI).  An estimated 4 out of 5 residential buildings built since the late 1990s are governed by a homeowners' association.

However, as more Americans live in privately-owned communities, more lawsuits arise.  Therefore, it is important to make sure the directors and officers of your board are protected against monetary damages incurred through lawsuits resulting from their actions as board members.

Board members all have one thing in common: they run the risk of being sued because they've assumed professional and fiduciary liability. Directors' and officers' insurance (D&O) is a policy that protects your board members from such a situation.

The board is a decision-making body that affects the economic and physical safety of shareholders and people that do business with the association.  This means that the directors and officers face personal liability for their actions, and they are subject to certain rules when performing their given responsibilities. They must be prudent and perform their duties in a manner they believe to be in the best interest of the association; they are prohibited from using their position of power and trust to further private interests; and they are required to perform their duties in accordance with applicable laws and the terms of the organization's charter.

If a claim has been made against the board, the personal assets of any board member will be at stake if they do not possess D&O coverage.

Community members who serve on your board are performing an essential job for free.  Why should anyone be able to sue them directly? This is why it is important to protect your board with the proper D&O coverage.

Directors' and officers' insurance covers against third party financial damages and other claims not covered under General Liability.  The basic purpose of this policy is to protect directors and officers of your board from claims made due to allegedly wrongful acts or omissions made while acting in their individual or collective capacity on behalf of the association.

If a board does not carry the proper insurance, it will not be covered if it is necessary to defend themselves in legal proceedings. The defendants would have to dig into their own pockets to pay for legal expenses.

Contact your personal customer service representative here at Brownstone Insurance to make sure D&O Coverage is included on your policy by calling (617) 236-6400.