D & O
Protecting Your Community Association And The Board Directors & Officers
BY : ELAINE PANLILIO ATLAS INSURANCE
As a community association board member , you could do everything right and still get pulled into a lawsuit . Additionally , you could also be held personally liable for your decisions as a board member . A Directors ’ and Officers ’ ( D & O ) liability policy is errorsand-omissions coverage for a community association ’ s board of directors and officers . Coverage also extends to trustees , employees of the association , committee members , volunteers , property managers , and property management firms .
With Hawaii having the largest concentration of condominiums in the country , living in a community association and serving on an association ’ s board presents issues that impact many residents and homeowners here in our state . Here is a list of some of the best practices to help your board and association avoid potential lawsuits and D & O claims :
KNOW , UNDERSTAND , AND FOLLOW THE RULES A board ’ s failure to adhere to bylaws is one of the most common D & O claims , and fortunately , this is preventable . To be able to enforce the rules , the board must know the rules . If there are frequent changes to a board ’ s composition , new board members should receive and be required to read the following : association bylaws ; covenants , conditions , and restrictions ; and any other governing documents .
MAKE CERTAIN THE RULES REMAIN CURRENT Consult with the association ’ s legal
counsel to ensure compliance with current laws .
OPERATE AS A BUSINESS Things can undoubtedly become personal when dealing with people ’ s homes , so adhering to Parliamentary Procedures or Robert ’ s Rules of Order when conducting a meeting is way to keep emotions and personality conflicts from getting in the way of effectively governing the association .
ELECT BOARD MEMBERS WHO ARE COMMITTED TO SERVE The importance of a board member ’ s strong commitment to the community and its regulations cannot be understated . Board members should be elected based on their commitment to know , understand , and apply the rules and regulations in a legal and consistent manner .
KEEP GOOD RECORDS The board should maintain accurate records of meeting minutes , financial records , and complaint logs . Accurate records are the best defense against challenges to the board ’ s decisions and actions
ENSURE ADEQUATE INSURANCE COVERAGE IS IN PLACE D & O policies do not cover suits brought about by inadequate insurance coverage or the board ’ s failure to purchase coverage . To avoid uncovered claims , conduct policy reviews with your community association ’ s insurance agent to ensure that the association ’ s policies meet the limits as set forth in the governing documents . Also confirm that the D & O policy covers past , present , and future directors and officers and their spouses ; committee members ; volunteers ; association employees ; the property manager ; and the property management firm .
IMMEDIATELY NOTIFY THE INSURER OF ANY CLAIM D & O policies require timely notice of claims . They also require notice of incidents that may give rise to a claim . Since insurers are in the business of risk management , they can assist in potential claim situations and in the early resolution of a claim .
Avoiding lawsuits and D & O claims while effectively governing your community association is a very important undertaking . What this article aims to achieve is to help you protect your community association by imparting solutions and knowledge on how to avoid the most common scenarios that could lead to potential lawsuits and D & O claims . +
Elaine is an Account Executive in the AOAO Unit at Atlas Insurance Agency . Elaine is an alumnus of UH – Hilo and has been in the insurance industry for 11 years . She has earned the following Insurance Professional Designations through the National Alliance for Insurance Education and Research : Certified Insurance Service Representative ( CISR ) in 2010 and one of the insurance industry ’ s premier designation , the Certified Insurance Counselor ( CIC ) in 2013 .
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