Do you have adequate Directors and Officers Insurance?
We are constantly surprised by how many HOA board members are without D&O Coverage. Even those board members who do have coverage are often not fully covered, sometimes leaving large gaps in their coverage that can put them at risk.
Do you have a false sense of security? Get peace of mind that you have the correct coverage and contact us today for an insurance audit.
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What homeowner associations need to know about Directors’ & Officers’ Liability
by Tifinni A. Tegan
What is Directors’ & Officers’ Liability Insurance?
One of the most important insurance policies in any homeowner association’s financial portfolio is also one of the most overlooked and misunderstood: Directors’ & Officers’ (D&O) Liability Insurance. A good D&O liability insurance policy protects both past and present HOA board members, the property manager, employees, volunteers, and the community itself from lawsuits arising out of the management of the HOA. This could include any number of HOA-related issues, such as a new building project, a foreclosure against a property owner, or a complaint filed by a homeowner.
Are all D&O liability policies the same?
No. Depending on the insurance carrier, there can be a broad range of differences between what each D&O policy covers and what they exclude. One quick way to tell if your HOA’s D&O liability coverage is sufficient is to determine whether you have a separate “stand-alone policy” or if your D&O has simply been added to your HOA’s commercial property and liability package policy. “Boards often develop a false sense of security regarding their D&O coverage,” said Kim Angeli, President of Powell, Angeli and Langford Insurance in Raleigh, NC. “They see it checked off on a box on their insurance package and think that it affords them appropriate coverage.” “The two biggest D&O claims against HOAs in the country,” continues Angeli, “are non-monetary and discrimination claims.” Both are specifically excluded from the vast majority of commercial package policies on the market, including those written by recognizable, brand name insurance companies. “They’re excluded for a reason,” Angeli said. “The endorsement costs about $150 to add to the package policy, so it doesn’t afford much coverage. You get what you pay for. If you take out the endorsement and read it, typically the first two paragraphs are what they cover and then the next three pages are the exclusions.” Conversely, the stand-alone D&O liability policy underwritten by CNA Insurance Company and recommended by Angeli was created to protect HOAs, so it provides coverage for claims not covered by most other insurers, like discrimination and non-monetary claims. “Something as important as D&O deserves its own policy,” said Angeli.
CAI Conference Presentation
If you would like a copy of the presentation at the 2014 CAI-NC Conference in Durham Breakout Session presented by Andrew Bateman, please click the link here.
If you would like a copy of Andrew Bateman’s presentation at the 2013 CAI Conference “Fast Water and Slow Water” for HOA’s, please click the link here.