All wise community associations should carry D&O - Directors and Officers liability insurance which provides coverage in the event of a lawsuit claiming some Board act or omission caused harm. D&O insurance does not, however, cover a director or officer who is hurt while on the job. For example, if a Board member climbs on the roof to inspect it, falls and gets injured, there will likely be no insurance coverage for medical bills or lost wages. This is because directors are typically not required to climb on roofs as part of their job.

A typical D & O liability policy protects the association when someone makes a claim for monetary damage, not property damage or personal injury, arising from the negligent actions of the Board. Claims for personal injury or property damage usually fall under the association's general liability policy. The insurance company is required by the terms of the insurance policy to defend such a claim and to pay any settlement reached or judgment entered due to the association's negligence. Payments are capped by the policy limits less any applicable deductible.

Some general liability policies have "Medical Payments" coverage regardless of who is at fault, however, most policies exclude claims for medical payments to the "insured" and generally define the "insured" to include officers and directors.

Also, since directors and officers are rarely deemed to be association employees, they would not generally be covered by workers comp insurance.

Before an association is liable for an injury suffered by a director or officer, it must be established that either:

1. the association directly caused the damage,
2. required the director to perform the task which injured him or,
3. was negligent in some way that the director was injured. In the example, the association did not act in a negligent manner and, therefore, has no liability to pay for the director's medical expenses.

One final consideration. D&O coverage will NOT protect Boards that knowingly violate the governing documents or state law. For this reason, it is very important that all board members review and become familiar with them. Ignorance of the documents or law is no excuse.

Understanding the scope of association insurance coverages is an important part of serving on the Board. If it has been a while since the policy has been reviewed, invite the association insurance agent to attend a board meeting to explain the coverages and ways to improve it.

For more information on this subject, see www.Regenesis.net.

Published: February 16, 2000

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Richard Thompson owns Regenesis, a management consulting company that specializes in condominium and homeowner associations. He is a nationally recognized expert on HOA management issues. Regenesis publishes The Regenesis Report, a monthly newsletter for HOA boards, developers and managers. To subscribe, go to Regenesis.net. He can be contacted by email at .