Director's and Officer's Insurance

Is it necessary... Is it adviseable that a newly formed HOA have D&O insurance? If so, who sells such an insurance? What are the pitfalls if there is no provision for such in the HOA?

MANDATORY would be more on point. Suggest you read about Rouff v Harbor Creek, which resulted in a $4Million settlement against the individual owners of an Association. Below are some random passages from various sources.

California reiterated its policy of joint and several liability in the third case decided on this issue, Ruoff v. Harbor Creek Community Ass'n. In Ruoff, Mrs. Ruoff's conservator sued the individual owners of condominium units in the Harbor Creek condominium community to recover for injuries Mrs. Ruoff sustained when she slipped and fell on a stairway in the common property. The trial court dismissed the case. On appeal, the court reversed and remanded the case to the trial court for further proceedings consistent with the determinations made by the California Court of Appeals.

Represented a woman in a personal injury slip and fall claim caused by defectively constructed stairs resulting in a $4,000,000 settlement to client and the reported case of Ruoff v. Harbor Creek Community Ass'n, 10 Cal. App. 4th 1624, 13 Cal. Rptr. 2d 755 (1992).

After Ruoff, California enacted a new statute in 1995 "to offer civil liability protection" to individual unit owners if the owners association carries a certain level of prescribed insurance, specifically coverage for the association's general liability of "[a]t least two million dollars if the common interest development consists of 100 or fewer separate interests" or "[alt least three million dollars if the common interest development consists of more than 100 separate interests." The California Legislature effectively said that a tenant in common can buy his or her way out of liability by purchasing insurance for the owners association if the tenants in common buy enough coverage.

Thanks a lot for the good advice.... I assumed that such a thing was necessary so that just added conviction to what should be done...

Thanks much for your inputs... I have enough to go on now..

It is very important for every association to have Director & Officer Insurance - no meter old or new.

This will protect the all board members against any law suits.

Mark,

Determining the amount of coverage needed can depend on several issues, how litigious your Association is, if the Board comply with the governing documents and laws of the State or do they just wing it and do what they think is right, budgeted amount for insurance, cost of typical litigation in your area, etc.

Some States, CA for example, specify minimum amounts.

I don't know of any actual guidelines to aid you in determining the amount of D&O insurance needed. Others might. I would expect that you would need an amount the Association feels comfortable with that they can afford.

Tim

Our CC&R's required a 1Million dollar policy at minimum. That was also the same amount that any contractor had as well. Try to hire only licensed and insured contractors and verify it...You also want to check out the payout amounts for a lawsuit. It's not really the million dollars. Ours paid out about 60 -90K in a lawsuit.

Alot of the insurers offer packages even if you don't have the amenity. Like ours covered a HOA vehicle. We didn't own a vehicle for the HOA. However, the insurance would cover the difference if a board member was on HOA business and their insurance. The insurer didn't let us out of this option as it was part of the "package" they offered.

You may need to make payment arrangements. We paid about 2-2200 a month for 10 months on our policy. Some insurers want the whole amount upfront. Whatever the insurance costs are your HOA needs to make sure it can cover the costs with the dues. It is a pretty good chunk of it.

You may not get volunteers to be board members if the HOA doesn't have this insurance. Not many people will put their personal assets on the line if they make a mistake. Which is what this insurance policy really protects against.