Homeowners association board members make difficult decisions, which can have a huge impact on the people around them. Consequently, individual members of the HOA board are susceptible to becoming targets for lawsuits along with the association itself.
Considering the majority of them own at least one of the development units, they do have something to lose in case they are sued. Litigators are aware of this and the fact that members of the board often carry a liability insurance, and are, as a result, keen on filing grievances against board members and HOAs.
As a member of the board, you need to ensure you are covered with a special type of insurance premium placed in order to protect the members of the HOA board: The Directors’ and Officers’ Liability Insurance.
What is Directors’ and Officers’ Liability Insurance?
More commonly known as “D&O” coverage, this insurance protects the trustees and officers from being held accountable for the actions they took or failed to take as members of the board.
Considering how every human makes blunders and they should not be falsely accused or held responsible for an unintentional mistake beyond their control, the D&O insurance provides protection similar to a doctor’s medical malpractice insurance. It does that by ensuring sufficient liquidity for the parties that suffered the damages by providing to them financially. The HOA members are protected (if the damages are within the coverage limits of the policy) from being driven into bankruptcy due to the lawsuit and the company providing the insurance also arranges the legal defense on behalf of the member of the board.
However, this policy funds the damages and covers the board members only when they make a mistake unintentionally and does not support deliberate wrongdoings.