Question: I have been concerned about my husband's exposure to a lawsuit because of his position on the board of our condo association. I've suggested some things to be vigilant about and now I have heard of Directors and Officers Liability Insurance. What is that?
Answer: Despite careful management and wise decision making, some boards and board members have been sued for many reasons including the mismanagement of funds. They have also been sued for failure to or overzealousness in enforcing association bylaws, discrimination against a unit owner or an employee, poor investment decisions, failure to conduct meetings in accordance with condominium documents, violations of the Sunshine Laws and for not following loss control and claims prevention recommendations.
Directors and Officers Liability Insurance (D & O) is protection for the directors and officers of an association. This insurance is used when board members are faced with legal action in conjunction with the performance of their duties relative to their position on the board. This insurance has become closely associated with broader management liability insurance which covers liabilities of the association as well as the personal liabilities for the directors and officers of the corporation.
D & O insurance is usually purchased by the association itself, even when it is for the sole benefit of directors and officers. Reasons for doing so are many, but a good reason for the association to pay for the insurance is that it assists the association in attracting and retaining association funds.
A common misperception of D & O insurance is that it makes directors or officers able to engage in acts they know to be wrong. This is not the case. Intentional acts are not covered in D & O insurance. Only negligence or mistakes by directors would be covered.
If you husband is concerned about actions contemplated by the board, he or the board should seek the advice of an attorney who is knowledgeable about the legal issues of association management.
Attorney Sylvia Heldreth is a certified specialist in real estate law. Her office is located at 1215 Miramar St., in Cape Coral.
This article is not intended as specific legal advice to anyone and is based upon facts that change from time to time. Individuals should seek legal counsel before acting upon any matter involving the law.