D&O coverage limit

I am curious what other associations are carrying in terms of D&O coverage? We are a 200+ unit condo association (about $18 million in assets if it matters) and have 1 million in D&O coverage. I just read an article about a similarly sized association that carries 5 million in D&O coverage and another article which pretty much said a million is the bare bones coverage these days. Feedback from others would be greatly appreciated.

The amount to carry really depends on how litigious your membership is.

We carry $1M. If you think your BOD might one day be made up of dictator types or fools, I would suggest carrying more.

Just because it says 1 Million dollars doesn't mean it pays out 1 Million dollars. It's complicated and should read over your policy on the exact pay out. Our policy capped out if someone were to sue between 60 - 80K. NOT the 1 million the policy is for. This is pretty typical as I think the insurance pays part of itself back through the policy. They put up the legal battle so they make sure to cover that.

It is an interesting read to find out the reality of an insurance policy. Your HOA may be covering options it will never use. Our covered the HOA vehicle. Our HOA doesn't own a vehicle. However, it would cover the difference between a board member's personal insurance and the accident costs if there were an accident during doing HOA business. Basically, it worked like a "Gap" insurance. It just is written that it sounds like it is covering an actual individual vehicle which most HOA's would't own or need to.

What makes some of these options interesting is the fact you can't pick and choose them. HOA insurance often comes in a Packaged deal in order to save on the rates. So if you wanted to get rid of this option of the car the insurer may not let you as it's part of the overall package of coverage. It also doesn't help as there are about 20 insurance companies nationwide that may even offer HOA insurance. A HOA needs insurance and not having it isn't an option.

What is MOST important is making sure if you have common elements such as clubhouse, pool, or other amenity that their CURRENT value is maintained and covered. Could you rebuild your clubhouse for the amount that it is covered for? If the structure is over 20 years old and it's replaced costs are 80K, could you build an identical one now a days for 80K? THAT is the area you need to raise the value of your insurance. The actual costs of amenity replacement to today's standards. Otherwise if a tornado or fire were to hit your clubhouse today, your HOA would have to fund the difference in the building costs or have a smaller clubhouse if any. Look into that coverage more than the lawsuit payout aspect.

Hi Jason,

Depending on the area you live in and the costs of construction it could be lots of things.

For a condo, it could be foundation work
For a condo or HOA it could be pools, clubhouses, etc.

If someone was injured and is seeking damages caused by negligence, legal expenses could be in the hundred of thousands depending on the hourly rate of the legal fees and the length of time it takes to resolve.

If they didn't put money into a Reserve fund and it's now time to replace a major component (roads, parking garage, etc.) it can get pricy. Just last week we received a quote of $450K to mill and pave our roads/parking areas.

Have you asked your Board for more info?

Tim

Why am I confused? D&O is Directors and Officers in case someone sues a Director/Officer versus liability such as a defective building. Again, where am I confused?

Thanks

Tim

My confusion is the chat was about D&O insurance then you mentioned million dollar projects. My confusion was I thought you were linking the two.

John