D&O Insurance for the Board

Started by TrentV • 2 replies • 1322 views

💬 Join us to post & get advice from 50,000 HOA & Condo leaders.

⚡ Takes 30 seconds

Already a member? Log in

TrentV (Utah)
Posts: 1

Posted:

Our previous Board consisted of one man acting as president and a management company running the show. For the past two years the management company has been performing maintenance and all sorts of odd jobs for our HOA without any Board supervision. Unfortunately the lack of supervision has put our association approximately $30K in debt. Me and two other members of the association took over as Board members to try and fix the situation. While working on the financials to get our budget back together, we noticed the D&O policy was dropped by the previous President. While discussing the coverage with the other two Board members, they both decided that we can't afford to pay the $800 to renew the coverage. I am extremely worried about this decision, as I am the President. I am almost to the point of stepping down from my position because of the lack of coverage. Am I over exaggerating? Do we really need the coverage or are we covered by the volunteer act with the state (Utah)? Is D&O insurance something a Board can live without?
Please let me know your thoughts...

TimB4 (Tennessee)
Posts: 21,062

Posted:

Trent,

D&O insurance is typically required within your governing documents. At its most basic, D&O insurance protects directors and officers from liability arising from actions connected to their corporate positions.

Without D&O Insurance, a Director could be required to defend himself at his own expense for any legal action brought against him/her as a Director or Officer of the company. Without D&O insurance, Utah Non-profit corporations law, 16-6a-903, the Association will be responsible for any expenses incurred " by the director in connection with the proceeding or claim with respect to which the director has been successful". However, if the Director loses the case, the Association would not have to pay the expenses.

Bottom line, yes, you should have the D&O insurance.

As a side note, the management company should not be on your Board of Directors. They are working for the board under a contract. You may want to consider seeking bids, inviting the current management company to submit one, for a new contract.

Tim

JanetB2 (Colorado)
Posts: 4,219

Posted:

Trent ... Tim is right. Just ask the other board members if they are willing to take the chance of having to come up with legal fees out of their pockets or have HOA pay for the insurance. I think when asked this question they may change their minds with regards to proper insurance.

🎯 You've read this entire discussion

Join the conversation with 50,000 HOA & Condo Leaders:

✓ Ask follow-up questions
✓ Share your experience
✓ Get expert advice
✓ Access 350,000 discussions

Create Free Account →

⚡ Takes 30 seconds

Already a member? Log in here