Indemnity vs D&O Liability Insurance

Two shields are better than one.

You can't guarantee (or even hedge) what another person/owner will do. Maybe they are willing to pay. Maybe their brother is a lawyer so they get it for free.

Board Members might (should) think twice about joining a Board that doesn't provide such basic insurance for them.

The minor expense of the premiums will be worth the major expense of a lawsuit. You insure, not because you expect a lawsuit, but because the lawsuit would be devastating.

Thanks.

So the vote is in: 2 board members vote AGAINST getting the D&O. I am the only one who votes yes. So I guess that means my options are: resigning from the board, staying on and taking the risk without it, or defying the vote and buying it anyway.

I guess the last option is legally wrong? At what point does fiduciary duty supersede board votes? For example, these same 2 board members refuse to fix dangerous stairs, replace molding drywall, and other such obvious wrongs. At what point am I legally 'permitted' to act in the interest of safety above these kinds of votes?

Beth what do your documents call for? In addition to the indemnification clause ours spells out the minimum insurance the BOD is required to maintain and D & O is in there. Also while the judge is not required to grant them, the winning party in a lawsuit can request that their legal fees be paid by the loosing side. And if the other’s sued the HOA and won they could be exempted from paying their “share” of the settlement.

I agree......but what can I do? It was voted NOT to obtain it.

Roger,

There is no provision in the CC&Rs or Bylaws that outline how to resign from the Board. The only required insurance in the documents is common area liability and property damage.

This board completely disregards the documents anyway. This is the first board since 1978 (I organized the establishment and vote). The 3 of us were voted in December 6, 2009 and the same two other board members continue to refuse to meet. All communication is by email. They have refused my requests to hold a meeting, elect officers, do repairs of safety issues, and now purchase D&O Liability (can you guess why I wanted it?)

I guess the safest is to send my resignation by certified mail.

Maybe I can be more effective as an owner NOT on the board?
Any ideas on this?

Your Bylaws probably have a provision for how the Membership can remove Directors (Board Members).

We removed ours via a petition signed by over half the eligible homeowners.

Your Bylaws probably have a provision for what happens when Directors are removed; replacements are probably selected by the remaining Directors. If that's right, and you and your neighbors remove the other two, then you can select who replaces them. Make sure you have neighbors willing to serve.

Have you shopped insurance agents for D&O policies?

Thankyou Micheal and Glen - both good ideas
BUT......

Michael: The membership majority voted AGAINST buying it, so they won't want to vote the other board members off. They think it's a "waste of money" and "we can all get along" lol
Also, we are a 10 unit complex and the 2 other board members own 5 units between them (I own one and there are only 2 of us that are owner-residents). Even if the others didn't like their decision, it's impossible to vote them off.
I'm stuck

Glen: I did check the state laws and unfortunately there is no mention of required D&O Insurance. Anyway, the other board members ignore the state laws to have an independent audit of the books (there's never been one) and the law that requires a fidelity bond on board members. They don't care what law they ignore it seems.

We are under the pre 1982 Condominium Act and so are not even obligated to register with the Secretary of State and become a corporation. Besides which they don't do receivership's for HOA's in Texas.

A pretty bleak picture eh? I really must resign. But first I plan to get written confirmation that I motioned to fix safety repairs and abide by the bylaws. They will vote against it, as they already have unofficially, but then I will have proof that I tried when something terrible does eventually happen. Since they refuse to have a meeting, I will have to do this via email.

If you can think of any other safe guard I might take, please pass it along.

Thanks for the help!

I'm sure it varies state to state, but our Insurer, Farmers, failed us utterly on D&O. A recent amendment to our policy (read it carefully) said the insurer would not cover lawsuits that do not include demand for damages.
The guy suing us carefully crafted his suit to preclude damages and we are looking at $400,000 in attorney fees, completely uncovered.
We are a six unit assn. and we will go bankrupt, collectively and individually.
Run, do not walk, away from the board. If that is not an option, buy a policy yourself. For us, it was useless anyway but for this reason and many others I believe
CIDs and HOAs are untenable.
We cannot dissolve, we cannot go bankrupt (debts devolve to owners) and there is no way out if a plaintiff has some resources.
Gopd luck.

we are in california.....law prohibits bankruptcy in that debts devolve to owners, so we go under together and alone...and law requires 100% support for dissolution.

Lois, I’m not an attorney so this is a question for yours. I would see if you could file a lawsuit asking for damages and have it combined with the existing suit to drag the insurance company in.

I asked my homeowners carrier about that. They have that, but it's only for special assessment to cover damage to HOA improved property (flood, fire, etc.) In other words, extends my homeowner coverage to my stake in similar property and claims of the HOA, if they lack property insurance.

But it doesn't cover the types of things my homeowner's policy doesn't cover -- liability, etc.

That's just the situation with my own carrier (USAA).