Question: Our Directors & Officers Liability Insurance has come due for renewal. Our President says we do not have to worry about it. Is that true?

Answer: All HOAs should have two kinds of liability insurance, General and Directors & Officers (D&O). The difference between the two is: General Liability deals with claims like "slip and fall" accidents. D&O deals with liabilities relating to the Board’s managing the HOA in a "prudent or businesslike way." This definition leaves room for a claims of mismanagement for the Board's failure to collect monthly assessments or for not properly reserving for repair or replacement of common elements. The Board is also exposed to liability for making or enforcing rules and regulating exterior alterations or additions and a multitude of other possible scenarios.

HOA directors and officers can be held personally liable for these "errors and omissions" that result in a financial loss to the association -- so D&O coverage generally protects the directors and officers against losses and expenses based on an error or omission, negligent act, misstatement or misleading statement, or breach of duty. The cost of the coverage is quite reasonable. Your President is dead wrong. Do not serve on your HOA’s Board unless this essential insurance is in place.

Question: Our Board holds closed meetings, directors are told not to discuss the meetings and the minutes aren't available to residents. Is this okay?

Answer: Your governing documents or state HOA statutes may require open Board meetings. But whether or not open meetings are required, they should be open because secret meetings will only breed suspicion. All association members are entitled to know what goes on. There are a few exceptions: Discussions of sensitive contract negotiations, litigation, collections and personnel matters may be withheld due to privacy concerns but all else should be open. All Board meetings should be advertised to the members and enough room to allow a reasonable number to attend.

Question: I serve on the Board and sometimes motions come up that are very controversial. Any thoughts about handling these hot potatoes?

Answer: If asked to vote on a controversial issue, it is every director's right to dissent and insist that the opposition be recorded in the minutes. This is very important if the vote ends up landing the association in court. The dissenter can point to the record for exoneration. That said, a dissenting director should not undermine the board action by "talking out of class" about it or stirring up the other members unless the action was clearly illegal. If the question comes up, it's appropriate to say, "I voted against it but the majority voted in favor. If you don't like it, let your thoughts be known to the Board President."

Question: The Board sometimes enacts rules that contradict the governing documents. What’s the proper procedure?

Answer: The Board does not have the authority to amend the governing documents or enact rules that contradict them. Amending the documents requires an appropriate vote of the owners which should be specified in the governing documents or your state HOA laws.

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Published: June 26, 2002

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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 .