Homeowner associations rely on members to volunteer time, talent and energy. They do this for no pay however there is still legal exposure for mistakes or errors made. Directors & Officers Liability insurance is designed to protect and defend HOA volunteers and is often included in HOA insurance packages. It also can be purchased separately. The following Q&A discusses various aspects of D&O:

1. Does our current D&O insurance cover our needs? If your homeowner association's coverage is a part of a "package," you may not have the best available coverage. Although national insurance carriers offer good property and general liability coverage, their D&O coverage is typically inadequate. Specialty D&O carriers can offer your insurance significantly better coverage at a reasonable cost. Check and compare.

2. What key D&O coverages should HOAs have? Coverage should extend beyond the usual named "insureds" (current board and committee members). Coverage should include past directors and officers, the HOA itself, the managing agent and management company, and developer-appointed board members. An adequate D&O policy includes:

   • Legal defense

   • Indemnity coverage

   • Defines "loss" to include the costs, including attorney fees, incurred in defending a lawsuit

   • Non-monetary claims such as injunctive relief, defense costs for breach of contract, discrimination and wrongful employment practices claims, and failure to maintain correct or sufficient insurance

3. How can we determine if D&O insurance is adequate? Consult with an insurance agent with D&O policy experience. They can review your current policy and make recommendations.

Protecting the homeowner association against lawsuits is extremely important. It's a good policy to review your insurance coverages every year and this one is no exception. Don't wait to be served with a subpoena. D&O the right thing.

Published: February 15, 2006

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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 .