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Directors and officers (D&O) liability insurance is an important but often overlooked policy for homeowners associations.

Here at Blue Lime, we strongly believe HOAs should protect their board members from the expense of potential legal actions taken against them. HOAs run on the backs of board members, many of whom work long hours on a volunteer basis. Most associations wouldn’t hesitate to insure the HOA’s tangible assets against fires, floods, natural disasters or vandalism. We believe the HOA should also protect its less tangible assets – the members who help run it.

What is D&O Insurance?

While the association’s liability policy protects the association as a whole, it is not designed to protect an individual board member. Neglecting to include D&O insurance in an HOA’s policy exposes every board member to personal liability, including possible legal fees and settlements associated with a lawsuit.

When a lawsuit against the board names a specific member, a D&O policy will cover them.

Typically, D&O insurance covers all current board members, and depending on the policy, may cover past members as well. It may also cover the property manager, along with community volunteers and employees. Certain D&O coverage may include the cost of legal fees as well as potential settlements. Intentional breach of association laws or willful negligence on the part of a board member is not covered under the D&O policy.

Is D&O Insurance Really Necessary?

Associations should look closely at their current insurance policy to see whether or not their board members are covered. Certain policies already include D&O insurance, but if not, it will need to be purchased separately. Adding yet another premium to the cost of insuring an HOA may seem like a burden, but it can be much more costly to omit it. D&O policies are flexible, and HOA boards can work with an insurance agent to determine the proper amount of coverage at a reasonable price within their budget.