Members of co-op, condo and HOA boards often give a great deal of their personal time to make decisions in the best interest of their association, cooperative or condo community. These volunteers are charged with protecting the community they live in, as well as their own and fellow residents' investments. But as hard as they work, board members are human, of course—and it's almost inevitable that they will make mistakes from time to time.
But what protects individual board members if an honest mistake or administrative misstep loses the association money, or results in a lawsuit from an association member? If the cost of a judgment against a board—no matter how honest the mistake that caused it—was taken directly out of the board members' pockets, who in the world would ever serve on a building or HOA board in the first place?
The answer to this conundrum is Directors and Officers coverage—D&O for short. It's insurance that offers protection to board members so they are not held personally liable when trouble arises, and it's something no board can really do business without.
The Basics of D&O
"Directors and officers insurance provides liability protection for economic loss resulting from business-related negligence or wrongdoing on the part of board members," explains Karim G. Kaspar, a senior counsel with the law firm of Lowenstein Sandler in Roseland. "D&O policies generally protect individual directors and officers from losses not indemnified by the company and reimburses the insured for amounts that it is obligated to pay on behalf of its directors and officers for claims made against them."
"D&O insurance generally covers members of the board of directors," says Wayne G. Dow, Esq., director of underwriting at Kevin Davis Insurance Services in Tampa, Florida, a company specializing in community association insurance. "The president, vice-president, treasurer,