Serving on one's condo or association board is sometimes a rough job; there are tough decisions to make that impact the lives of one's own friends and neighbors, priorities to set that cannot possibly please everyone, and financial challenges that can make running even a small community feel like a game of roulette.
Given all of those pressures, the last thing condo, co-op, and HOA administrators need to worry about is getting sued over the decisions they make in the course of doing their job. Fortunately, protection from such damages exists in the form of Directors and Officers (D&O) insurance which, in a nutshell, protects board members from legal damages resulting from their decisions, as long as those decisions are made in good faith.
The D&O concept is fairly straightforward, but there are nuances to how the insurance product works which most condo owners, associations and management teams frequently don’t completely understand. Educating yourself and your fellow board members about D&O is vital however, and can save hundreds of thousands of dollars in damages.
Not a Simple Issue
According to Attorney Mark Pearlstein, a partner with the law firm of Levenfeld Pearlstein, LLC, with offices in Chicago and Northbrook, D&O insurance protects directors and officers who might be subject to claims and liability for decisions they make when managing a company or organization. The protection offered is insurance to cover the cost of defending a lawsuit against directors and officers, and in most cases, any damages awarded against these parties or the amount of any settlements of the claims.
In the context of homeowners associations, D&O insurance offers that protection for the directors and officers of the association or cooperative, shielding them against claims made against them in their official capacity as board members, or arising from contracts made by them on behalf of their associations.