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Why does a condo association need directors' and officers' insurance?

11-09-2016


condo colors_Keoni Cabral

Your home is your castle

Directors and officers of condominium associations are members of the community volunteering their own time to ensure the smooth running of their neighborhood.

However, what may seem like a great chance to look out for the community has the potential for great personal risk.

Board members of a condo association can be individually sued for any alleged wrongdoing on the part of the organization.

As well as paying to defend themselves, board members would also have to pay any damages awarded to the plaintiff out of their own personal finances.

Considering that lawsuits can easily top $100,000, this is not a risk to be taken lightly.

Get defensive

Luckily, there’s an option available which could help condominium associations protect their board members if a lawsuit should be brought against them.

Condo associations can buy directors’ and officers’ insurance which can help to protect the assets of their board members.

Directors’ and officers’ insurance can pay for the defense of the board member against the liability claim. It can also pay for damages, or settlements, if he/she is found at fault.

Who’d sue a condominium association?

A large number of claims alleged against those in charge of a condo association come from fellow neighbors.

For example, a member of a condo association could sue the board of directors for violating its own regulations by selling spaces in the parking lot to non-owners. These non-owners were able to buy part of the communal parking lot, resulting in a lack of parking spaces for people who owned condos in that unit. A similar case was settled for $280,000 including defense costs.

Likewise, a suit could be filed against a board of directors if a member of the condo association disagrees with the way that the association is managing their own board members.

For example, an individual may feel that new board members are not being elected regularly enough, or that not all members of the association have a fair chance of getting a place on the board of directors.

However, liability claims against board members of condo associations can also be made by people who are not members of the association.

For example, a board who cancels a building maintenance contract on very short notice could be sued for a breach of contract by the contractor.

Just like all lawsuits, it’s impossible to predict when claims against board members of a condo association might occur. Making sure a board is covered with directors’ and officers’ insurance can help to safeguard the future of a condo association by allowing members to volunteer their time without feeling personally at risk.

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