What You Need To Know About Directors & Officers Insurance

Directors and officers of homeowners associations (HOAs) make key decisions that affect the entire community. While they aim to act in the best interest of residents, those decisions can sometimes lead to disputes and legal claims. That’s why having Directors & Officers (D&O) insurance is essential.

Why D&O Insurance Matters for your HOA

Board service comes with potential liability. Even with indemnification clauses in governing documents—like the Covenants, Conditions, and Restrictions (CC&Rs) or bylaws—legal action against board members can lead to substantial costs. D&O insurance helps ensure that those costs don’t fall on the individual or the association.

Common D&O Claims Faced by HOAs

Board members may be held accountable for issues such as:

• Not following governing documents
• Mishandling election procedures
• Architectural decisions, including variances and easements
• Inadequate maintenance of common areas
• Disputes over assessments or fund usage
• Overstepping board authority
• Financial mismanagement
  
  

Key Features of D&O Insurance Policies

A well-structured D&O policy should include:

• Defense costs paid in addition to liability limits
• Coverage for current, past, and future board members, volunteers, and the property management company
• Protection against non-monetary claims

It’s important to review all policy details, especially exclusions. Common exclusions include:

• Fraudulent or criminal acts
• Property damage or bodily injury
• Construction defects
• Failure to maintain insurance, reserves, or common areas

Be cautious of policies offered as endorsements to package insurance, as they may lack essential coverage.

Claims-Made Coverage and Retroactive Dates

D&O policies are written on a claims-made basis, meaning coverage depends on when both the event occurred and when the claim was filed. Most policies also include a Retroactive Date, which limits coverage to events that happened after that date. When changing carriers, it’s critical to ensure this date is preserved.

Protect Your Board with Confidence

Understanding Directors & Officers (D&O) insurance is crucial for any association board member who wants to protect themselves and their community. From legal defense costs to claims of mismanagement, D&O insurance provides essential coverage that safeguards board members’ personal assets and ensures continuity in leadership.

At RealManage, we don’t just manage communities—we empower them with the knowledge and support they need to thrive. Contact RealManage today to learn how our expert guidance and tailored solutions can support your community’s success.