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HOA Directors and Officers Insurance

by Richard Thompson

Every director and officer of a homeowner association board has personal responsibility for HOA business. The basic purpose of Directors and Officers insurance is to protect directors and officers from claims made because of wrongful (or allegedly wrongful) acts or omissions made while acting in their individual or collective capacity on behalf of the homeowners association.

General liability insurance will not protect directors and officers in the same way. This insurance is to cover against third party bodily injury and property damage. Directors and Officers insurance covers against third party financial damages and other claims not covered under General liability.

Here’s a list of scenarios in which directors and officers have liability:

Continuing a wrongful practice after learning it’s wrong

Libel or slander

Failing to pay HOA debts in a timely manner

Improper management resulting in losses

Receiving personal gain while performing as director or officer

Making decisions based on adequate information and advised judgment

Ignorance of HOA books and records

Verifying content of official documents before signing

Obedience to the governing documents

Self dealing

Aiding and abetting illegal actions of others

Conflict of interest

Carelessness in conducting business or legal matters

Failing to see what could be seen by merely looking

Inducing intentional or careless wrongdoing

Ignoring statutory or regulatory requirements

Insufficient oversight of officers or employees

Nondisclosure of questionable or unlawful actions

Willful wrongdoing

Because of all these traps and pitfalls a director or officer could fall into, D&O insurance should never be optional. No one should serve on a board without it unless, of course, you have absolutely nothing to lose. I personally don’t know one person that doesn’t. Do D&O.

For more on HOA insurance, see www.Regenesis.net

Published: December 11, 2002

Use of this article without permission is a violation of federal copyright laws.

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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 .

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