Plant the Seed of Success For Your HOA

Homeowner association members may need liability coverage.

Your yard is blooming before your eyes. Your neighbors also have been rounding out their yards with diverse vegetation, and your homeowners association has been caring for the common areas of your development beautifully. You really do reap what you sow, whether in life or in business.

As your housing development grows, responsibilities increase and so may your need for insurance. As a board of directors and officers is formed, condominium and homeowners associations are at risk without non-profit organization directors and officers liability coverage, sometimes referred to as D&O. This coverage protects the board of directors, officers, trustees, employees, volunteers and members acting on behalf of the organization against claims alleging wrongful acts. These individuals may be held personally liable for the decisions that they make.

Without D&O coverage, the organization’s ability to pay a claim against it would only go as far as the association’s bank account. Since D&O is not covered under any other insurance policy and defense costs can accumulate quickly, D&O is needed to protect the assets of the organization and its individual members.

For example, your homeowner association or its individual members could be liable if:

• A claim is brought against the board of directors alleging their failure to adhere to certain restrictions outlined in their covenants or bylaws
• A claim is brought against the board of directors alleging financial mismanagement due to failure to set adequate reserves for replacement or repair of common property
• A lawsuit is brought against the board of directors by a homeowner alleging wrongful placement of a lien on his or her home due to allegations of the homeowner’s failure to pay his or her dues

As a member of the board, if the association’s contributors were to sue your organization for a breach of duty that resulted in financial problems for the entity, would you be protected? Plant the seed and encourage your condominium or homeowners association to grow by purchasing a D&O policy.

This loss control information is advisory only. The author assumes no responsibility for management or control of loss control activities. Not all exposures are identified in this article. Contact your local, independent insurance agent for coverage advice and policy service.