Directors and Officers Insurance Coverage

Directors and Officers insurance coverage is crucial for each and every condominium, town home and cooperative Board of Directors. This insurance provides for the necessary protection an elected Board needs to set policy, make important decisions in open session and enforce the rules and regulation of the building.

If someone wishes to file a lawsuit against the condo association corporation, they may also choose to name both the corporate entity and the Board of Directors as defendants. It is not sufficient to have liability coverage for the building for such lawsuits. There must be a separate policy that covers the actions, or inactions of the elected members of the Board of Directors.

When the Board is working with an insurance agents, the Board should make certain that their Directors and Officers insurance coverage provides for the appointment of an attorney by the insurance carrier at the cost of the carrier in the event that a lawsuit against the Board is filed. These days, homeowners will actually sue the Board for not acting in an appropriate amount of time to resolve a problem. For example, I have seen a homeowner file a lawsuit against both the Association and the Board of Directors because they believed that the Board did not act quickly to resolve a ceiling leak. I have also witnessed in instance where the insurance carrier denied coverage under the Directors and Officers policy coverage because they agreed that the Board did not act with haste. Boards should make sure, with their insurance agent, that all the various loopholes are closed when securing proper D&O coverage.

Working with an independent insurance agent who has experience securing coverage for condominium associations is important. I have witnessed Boards insist upon using All-State, State Farm or Farmer's policies simply because their premiums tend to be lower than Best Guide A rated carriers such as Greater New York, Hanover and Travelers Insurance. Penny wise and pound foolish. Each Association or corporation needs broad form coverage that protects those homeowners who selflessly volunteer their time and energy to sitting on a Board of Directors.

That is why the right agent and the right coverage is very important.