You can hear the clock ticking...you take a look at it and its 2 am! You just can’t fall asleep. Why? Your Condo Association had a very heated meeting tonight regarding roof replacement. The Board Treasurer wants to use the lowest bid, the President of the Board of Directors wants to go with the most highly recommended roof contractor, and another Director has an uncle who is a roofer. So many questions and concerns, it’s enough to keep a Board Member up at night worrying about how it will all turn out.
Condo Association and Homeowner Association Board Members deal with so many issues these days; they almost have to become instant experts at everything. Unfortunately, it’s not possible to become an expert at everything in life that is why Directors and Officers Liability Insurance for Community Associations is so important.
Board Members Personal Assets May be at Risk!
Board of Directors, officers, trustees, and even volunteers of Community Associations, can be held personally liable for decisions and actions made on behalf of your association. Claims across the board are on the rise at Community Associations across the United States. As you can see, it is a wide range of claim situations and having coverage that will protect and prepare an association for multiple scenarios is very important.
Many Directors and Officers Liability policies currently omit important coverages which are vital when the claims start to come in. Quite a few policies exclude breach of contract, discrimination, employment issues, and architectural issues. It’s a good idea to speak to your broker about what is covered and NOT covered in your Directors and Officers Liability policy.
Here are a few real-life examples of Community Association claims.
Discrimination: $100,000 Settlement-$140,000 Defense Costs-
A complaint was filed by a prospective buyer against a Condo Association with the Department of Housing and Urban Development (“HUD”) alleging that the prospective buyers’ application to purchase a unit within the Association was denied for discriminatory reasons. Specifically, the buyer alleged the Association President discriminated against him by denying his application based on his age, national origin, and familial status. The HUD commission issued a finding of probable cause. During that time, the Board allowed the prospective buyer to purchase the exact unit they had initially sought. Despite this, the buyer filed a lawsuit against the Association alleging discrimination and included damages representing the difference of the unit purchase price during the time of the disputed application approval process, attorney fees, compensatory and punitive damages.
Breach of Contract- $62,000-Defense Costs-A Condo Association and three former Board Members were sued by their property management company alleging breach of contract. The management company demanded payment of money they claimed was owed to them under the terms of the contract in question, plus attorneys’ fees.
Noise Claim-$320,000- An owner of a Coop filed a complaint with the Housing Court regarding noise levels coming from the buildings elevator equipment. The owner complained that the noise levels violated permissible sound levels set forth in the New York City Noise and Building codes. The case was resolved after the Judge put pressure on the owner to settle the case after stating there would be no chance to recover legal fees.
Foreclosure Judgement Claim-$175,000- A condo owner sued their association board of directors after his personal property was misappropriated during the association’s execution of a Foreclosure Judgement. The suit settled for $175,000 including legal fees.
With the current abundance of claims Community Associations are facing, the importance of carrying Directors and Officers Liability Insurance is critical. This protection is vital, especially with the willingness of people to bring a lawsuit over almost anything these days.
Board members should take the time to review your association Directors and Officers Liability policy with your broker. It’s a good idea to go over the coverage your association currently has and make sure the scope of it is sufficient.
The team at Kevin Davis Insurance has more than 25 years of Community Association insurance industry experience. For more information on Directors and Officers Liability insurance please visit our website at www.kdisonline.com.