CAI-NJ Nov. 2021(w)

Insurance: Directors and Officers and Liability Coverages

By Paul Felsen, Felsen Insurance

“..rest assured that there are many ways in which board members can be protected in the event that residents bring legal action...”

liens or breach of fiduciary duty, among others. Your typical personal homeowners policy, within the liability coverage sec- tion, provides coverage for bodily injury or property damage arising out of an act or omission on your part, even possibly as a member of a nonprofit board of directors. The key words here are “bodily injury” and “property damage.” Most claims of a “slip and fall” nature brought against the association would be covered under the community’s comprehensive general liability policy which includes board members as additional insureds. If you’re alleged to have acted improperly as a result of your board presence, but no bodily injury or property damage occurred, your homeowners policy likely won’t protect you. So where IS protection for you as a board member? Think of directors and officers liability insurance, commonly known as “D&O,” as the malpractice insurance you need for your suddenly newfound activity. A number of insurance carriers have developed uniquely designed and tailored policies and coverages for com- munity associations providing protection against claims brought against the association and members of its board. A typical, well-crafted policy includes wording detailing coverage included for “any actual or alleged act, error, omission, misstatement, misleading statement or breach of duty or neglect, including any personal injury (libel, slander, false arrest) or publishers’ liability, or any material asserted against, an insured person in his or her capacity as such.” Employment practices liability should also be included to protect you against suits brought by an employee of your association for any number of employment related allegations such as sexual harassment, wrongful termination, failure to hire

Congratulations!! The election is over and the ballots have been tabulated; you’ve been chosen by your fellow unit owners and resi- dents to serve on the board of your community association. But after all the hand shaking, pats on the back and words of encouragement (“I know you’re going to do a great job—now we can really get things in shape around here”), what type of personal exposure do you have because of your new volunteer (and unpaid!) position as a board member? Does your association carry adequate and proper insurance to protect you? Does any of your personal insurance provide coverage? First and foremost, rest assured that there are many ways in which board members can be protected in the event that residents bring legal action against the board. The ques- tion is, does your association have appropriate protection from your otherwise friendly next door neighbor, even that person you play pickleball with on weekends, who may suddenly have no hesitation filing a complaint against you if they feel you and/or the board have acted in an improp- er manner. Emotional and complicated issues unfortunately may result in lawsuits brought against you. Typically, claims against community associations and board members are related to housing discrimination, architectural disputes, inadequate reserves, negligence, third party breach of contract, breach of or change in covenants, disagreement over assessments, a misleading statement, voting irregularities,

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