In our previous article on this subject, we discussed the concerns homeowners face as they share risk in a Homeowners’ Association (HOA). In this article, we’ll take a look at the concerns that those on the Board of an HOA should have as they consider their own liability.
Professional Liability – Making decisions for a group can result in unforeseen liability. As an elected or appointed HOA board member, you are taking on the burden of determining some of actions for your community. If one of those decisions has a negative result, you may potentially be included in litigation. If so, who will defend you, and who will potentially help you with any resulting financial liability? These answers will typically be addressed in the articles, rules, and/or bylaws that govern the association. This can help indemnify HOA board members. In order to provide this indemnification, the association’s assets and/or a Directors & Officers (D&O) insurance policy should be in place as financial protection.
A D&O policy typically protects the HOA board members if a legal challenge arising from their decisions or actions in a board capacity. Some areas this may come into play include:
- Rules created by the Board
- Election disputes
- Actions taken by the Board such as evictions
- Demands for allocation of HOA resources
- Decisions on service providers and/or service offerings
There are often endorsements for D&O that may be included on package policies for an HOA. However, these may be insufficient when considering all the potential liabilities. A standalone D&O policy is often a more complete solution for protection, as it often addresses more coverage areas and may provide higher limits.
When making the decision to cover your HOA board with a D&O policy, talk with an insurance agent who has the experience and market options to adequately address your group’s needs. If you need a place to start, please reach out to Brandon Patterson at 865.453.1414 or brandon@ownbyinsurance.com for more information.