Directors and Officers Coverage aka D&O

Running a condominium association comes with significant responsibilities—and potential liabilities. Board members are tasked with making decisions that affect the property, finances, and overall community wellbeing. While these individuals often serve voluntarily, they are not immune to legal action. That’s where Directors and Officers (D&O) Liability Insurance comes into play.

What Is D&O Insurance?

D&O insurance protects board members and the association itself from lawsuits arising from decisions made in their official capacity. This type of policy covers legal costs, settlements, and judgments related to claims of mismanagement, breach of fiduciary duty, discrimination, failure to enforce rules, and more.

Why Condo Associations Need D&O Coverage

Even with the best intentions, board members can face allegations from unit owners, vendors, or even fellow board members. Examples include:

• Disputes over rule enforcement (e.g., selectively enforcing pet policies)
• Financial mismanagement (e.g., improper handling of reserve funds)
• Vendor contract disputes
• Failure to maintain common areas
• Wrongful termination or discrimination claims from employees or contractors

Without D&O coverage, the personal assets of board members could be at risk, and the association itself may have to fund costly legal defenses.

Key Features of D&O Policies

When considering a D&O insurance policy for your condominium association, look for the following:

• Broad Definition of Insureds: Coverage should extend to past, present, and future board members, as well as volunteers and committee members.
• Claims-Made Basis: Most D&O policies are claims-made, meaning coverage applies to claims filed during the policy period, regardless of when the alleged act occurred.
• Defense Costs: Ensure the policy covers legal defense costs either within or in addition to the policy limit.
• Employment Practices Liability (EPL): Consider endorsements for EPL, which can cover claims related to harassment, discrimination, and wrongful termination.
• No Exclusion for Non-Profit Status: Confirm that the policy recognizes the association’s nonprofit nature to avoid unnecessary exclusions.

D&O Coverage vs. General Liability Insurance

It’s important not to confuse D&O insurance with general liability insurance. While general liability covers bodily injury and property damage (e.g., a slip-and-fall in the lobby), D&O insurance addresses financial damages from management decisions and administrative actions.

How Much Coverage Is Enough?

The appropriate amount of D&O coverage depends on several factors, including:

• The size of the association
• Number of units
• Total budget and reserve funds
• Past litigation history
• Risk appetite of the board

Many condo associations opt for limits ranging from $1 million to $5 million, but higher limits may be appropriate for large or high-risk communities.

Final Thoughts

Board members of condominium associations are on the front lines of managing shared property and finances. With increasing litigation risks, D&O liability insurance is no longer optional—it’s essential. By securing a comprehensive policy, associations can protect both their leadership and the financial health of their community.