Directors and Officers liability insurance (D&O) provides coverage in the event of a lawsuit claiming an association board or individual director’s act or omission. D&O insurance does not protect the association when a claim is made for personal injury or property damage as a result of negligent actions of the Board or Director. Personal injury and property damage claims generally fall under the general liability policy of the association.
However, if a board or individual director knowingly violates the association’s governing documents or applicable law, D&O insurance will not generally provide coverage.
Each Board member is expected to act in good faith and in the best interest of the association. A board member is obligated to apply diligence, obedience, and loyalty in the performance of his or her authority. With this authority comes the possible grounds for a lawsuit.
Conflicts of interests
Mismanagement of funds
Irregular attendance at board meetings
Unwarranted salaries
Misrepresentation
Misstatement of financial condition
Misleading statements
Discretionary practices
Self-dealing
Actions beyond granted authority
WDPM