Why D&O Coverage is Crucial for Condo Associations

Insurance brokers may find that supplying community associations with particular coverages could be difficult. It’s important that there’s an understanding of the different hurdles that they face and see the risks that condo associations face.

A major piece of protection that condo associations can take advantage of is coverage for board leaders. Condo association D&O insurance can provide blanket protection for board members against a variety of claims that put directors and officers in the crosshairs.

According to a survey put out by the Insurance Journal, nonprofits reported that the total average indemnity payment for an adverse judgment was $457,000, something that a condo association may not be able to afford, especially hit with multiple claims over time. This is why D&O coverage for leaders is vital for associations to stay afloat and get out ahead of claims.

Major Claims Against Community Association Boards

Homeowners in a condo association—as well as employees or board members—can bring a suit against a community for just about anything. What varies is the success rate of these suits against a board. However, there are a handful of tried and true claims that are made that can put associations in a tough spot legally.

  • Breach of Fiduciary Duty: A condo association can be sued for breach of fiduciary duty. Shareholders and unit owners in a community invest their trust in boards. As a result, board members have the power to enact and put in motion house rules that impact the lives of all residents. In certain cases, board members can levy fines and withhold services. With this in mind, it’s plain to see that board members are fiduciaries to the shareholders and unit owners who have elected them to their position.
  • Discrimination: Complaints have been made before by prospective buyers against an association through the Department of Housing and Urban Development (HUD) alleging that an application to purchase a unit was denied for discriminatory reasons. Buyers have alleged before that an association’s board members discriminated against them based on age, national origin, race, or familial status. Even if an association allows a prospective buyer to purchase the unit they were interested in, the damage from a claim of discrimination can be damning.

Community association board members and managers of properties need to be aware of what is kept out of their current liability policy. First off, it’s important to have a condo association D&O insurance policy in place, but going over it and making sure to check what’s excluded in the area of D&O coverage is important. Some policies exclude breach of contract, discrimination, and employment issues, so it’s important to see how these gaps can be covered.

About American Team Managers Insurance Services

Founded in 1998 by Chris C. Michaels, American Team Managers Insurance Services (ATM) has provided wholesale and MGA services to more than 5,000 independent insurance agents throughout the United States. Our goal is to establish close, long-term relationships with our agency partners and insurance carriers and provide competitive products for the Exclusive and Non-Exclusive markets that we serve. For more information on our products and services, give us a call at (877) 671-7503 to speak to a representative.