By: AJ Scott, CPCU, CIRMS,. Community Partners Insurance Agency, LLC
If your Association is professionally managed, it’s critical that your Directors & Officers Liability (D&O) insurance extend coverage to your management company.
Pause – which one is D&O again?
D&O protects the Association, the Board of Directors collectively, and individual board members against “wrongful acts” allegations, much like an errors & omissions policy. Essentially, if someone objects to how the Association is being operated, administered, or governed, this is the policy most likely to respond. Common claims include failure to enforce the governing documents, improper handling of an election, challenges to assessments, breach of fiduciary duty, objections to architectural review decisions, and so forth. Like other liability policies, D&O insurance contains coverage for both defense costs (legal expenses to defend the claim) and indemnity payments (money damages, such as a settlement or a judgment, IF awarded to the claimant).
Whether you are a board member or a community manager, it is important to determine the quality of the Association's D&O insurance because the scope of coverage can vary significantly from one provider to the next.
OK, so why should our management company be covered under our policy? Shouldn’t they have their own insurance?
Yes, management companies need their own errors & omissions insurance for their business dealings. However, when acting under the Board's direction as the Association's designated agent, it is reasonable and appropriate for them to be covered by the Association's insurance.
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