D&O Insurance

I was approached by home owners in our chicago condo to run for a position on the board.

The present board has been in that position for over 5 years and don't seem to know anything about running a condo assn.

We are self managed at the present time.

I was told that we do not have D&O Insurance, so I told them that I would run once I was guaranteed that they had D&O Insurance.

Is there anyone who you can report them to, because they do not have sufficient insurance. No insurance, no debbi

Debbie

The link below should help in new Illinois requirements for Condo associations.

http://www.aaisonline.com/AAISFrame/ConnectFrame/AdvisoryFrame/tabid/143/ArticleID/848/Illinois-Enacts-Condo-Association-Insurance-Requirements.aspx

D&O insurance is required in IL

Mark,

I am sure Debbi can supply the source, but since I had just looked it up, here is the link to the Illinois Act:

http://www.ilga.gov/legislation/ilcs/ilcs3.asp?ActID=2200&ChapterID=62

Sec. 12. Insurance.
(a) Required coverage.

(D) The board of directors must obtain directors and officers liability coverage at a level deemed reasonable by the board, if not otherwise established by the declaration or bylaws. Directors and officers liability coverage must extend to all contracts and other actions taken by the board in their official capacity as directors and officers, but this coverage shall exclude actions for which the directors are not entitled to indemnification under the General Not For Profit Corporation Act of 1986 or the declaration and bylaws of the association.

(3) Fidelity bond; directors and officers coverage.
(A) An association with 6 or more dwelling units must obtain and maintain a fidelity bond covering persons, including the managing agent and its employees who control or disburse funds of the association, for the maximum amount of coverage available to protect funds in the custody or control of the association, plus the association reserve fund.

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And from the link that RichardP13, California, provided, part of which reads:

Other newly-enacted provisions of the Illinois Condominium Property Act provide that:
Directors and officers (D&O) insurance for condominium associations shall include, but not be limited to, coverage for defense of non-monetary actions, breach of contract, and decisions related to insurance; and Insured status under condo association policies shall extend to past, present, and future board members (acting in their capacity as board members), the managing agent, and employees of the board and managing agent.

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Also, Mark, would you serve as an Officer or Director on a Homeowner or Condominium Board if there was not D&O Insurance in effect?

That's not the question. She is looking to where she can report this board. I contend that:
1) There is no office to handle this
2) There is no remedy other than the courts
3) It is possible that no rules are being broken

Thank you. And there is a rule in IL that they have to have D&O Insurance, but I didn't know if there was some regulating agency overseeing this. They also have lost their incorporation. I was told that they don't have a copy of the Articles of Incorporation. I can get one from the state, but I would rather not have to pay $25 or $50 for it.

I just looked at the Insurance policy for my HOA. It says that the D&O Liability for Errors and Omissions is $2,000,000 for each D or O. Does that mean they would be covered in the event that the escalated a situation in a willful manner? I don't have anything specific. Only curious.

IMO, zero is not reasonable because, at minimum, the insurance must cover "all contracts and other actions taken by the board in their official capacity ..." That would cost more than zero.

Others may read the statute differently I suppose, but how they feel is IMO irrelevant.

In the language of the statute, I saw a requirement for insurance coverage - and I merely stated the obvious - that mandatory coverage costs money.

If you read those words differently Mark, I'm interested in learning how you read them. Perhaps you can convince me that another interpretation is also viable.

It seems that you are trying to read the words "Directors and officers liability coverage must extend to all contracts and other actions taken by the board in their official capacity as directors and officers" out of the statute as if they don't exist. IMO, that's a rewrite, not an interpretation. While you may think they are vague and toothless, they are the statute - Any attempt to give meaning to the actual language should be attempted before throwing inconvenient parts away.

NO, they would NOT be covered for malfeasance.

Nor would they be covered for nonfeasance.

They are, however, covered for misfeasance.

Hence the reason said coverage is sometimes known as 'errors and omissions' coverage.

if y'all doubt this info: READ THE ACTUAL POLICY (not the declarations or synopsis)

Lots of states pass laws regulating HOAs, but for the most part, there doesn't seem to be much enforcement, there typically isn't a state "HOA Police" that you can contact when the rules are broken. You could try the State Attorney's office, but I don't recall ever reading any threads here or elsewhere where the SA actually took any action. Unfortunately, that leaves enforcement to lawsuit in the civil courts.

Douglas ... I think you have arrived at the most intelligent position of anything I've ever read on this site.

It depends if the policy is inclusive or exclusive.

One will cover all defense costs and judgments up to $2 Mil. cap.
The other will cover a judgement up to 2 Mil. and all defense costs regardless of the amount.