Be aware of what is excluded in your Directors and Officers (D&O) Liability insurance
The D&O liability policy is the most overlooked and misunderstood policy amongst HOA boards. In the past few years, liability claims against HOA directors and officers has been on the rise. Frequently the claims include breach of fiduciary, breach of contract, non-employment discrimination, employment practices liability, and wrongful foreclosure.
Non-monetary and discrimination cases take the lead in lawsuits against HOA boards. And most commercial insurance packages do NOT cover these claims.
Why are they discluded then? A D&O endorsement to the policy is relatively inexpensive, about $150-$200. However, if you read the endorsement closely, the first couple paragraphs state inclusions, but the remaining 3 paragraphs state exclusions. Remember this saying…”You get what you pay for.”
Conversly, stand alone D&O policies are written to protect HOA’s and include protection for those most common discriminatory lawsuits.
Your HOA needs the following in Directors and Officers Liability Insurance provisions:
- At least a $1 million dollar limit – higher limits are available or increase coverage with an umbrella policy
- A broad definition of “Wrongful Acts” that includes discrimination and harassment
- Full prior acts coverage
- Coverage for non-monetary damages/claims
- Coverage for breach of contract
- Coverage automatically extended to volunteers, committee members, and spouses of board members.
- Defense costs – at least $1 million limit for defense costs
Education is key to understanding all the components of a sound D& O policy. It is the job of your broker to explain this to your board. It may be worth it to request a meeting with your broker and review your D&O today!
