What happens when a condo association board of directors makes a decision that sparks disagreement — or worse, a lawsuit? For many boards, the reality is that governance decisions, even when made in good faith, can trigger costly legal disputes. From financial oversight to enforcing bylaws, every choice carries risk.
That is why insurance agents need to understand how condo directors and officers (D&O) insurance works. The coverage protects board members and, depending on the program, may also extend to volunteers and the association itself. Funding defense costs and settlements (subject to policy terms, exclusions, and limits) helps reduce the financial impact of litigation.
Legal Exposures Facing Condo Boards
The legal challenges facing condo boards often run deeper than many realize. Allegations may involve breach of fiduciary duty, contract disputes, wrongful foreclosure, discrimination, or employment practices. These claims are the types of risks that specialized D&O programs from Kevin Davis Insurance Services (KDIS) are designed to address.
Let’s say a board moves to foreclose on a unit with months of unpaid dues. The action may be legal and justified, yet the homeowner sues. Even if the board prevails, defense costs alone can drain association funds.
And this risk isn’t just theoretical. In 2023, directors of a Honolulu condominium paid $600,000 to settle a retaliation claim brought by one of their peers. The case involved accusations of conflicts of interest and lack of transparency. It shows how governance disputes can escalate into significant financial risk, even when property damage is not involved.
Agents can help their clients by asking a few guiding questions:
- Are governance decisions well-documented?
- Has the board faced claims in the past?
- Do the community’s bylaws provide clear and enforceable standards?
How Does D&O Insurance Respond to Claims?
Condo directors and officers insurance provides more than reimbursement for losses. Most community association policies are written on a duty-to-defend basis, which means the insurer appoints and pays for legal counsel when wrongful-act allegations arise, even if the claims are groundless. Some policies, however, operate on a duty-to-reimburse basis, where the board selects its own counsel and seeks reimbursement for covered costs.
Key protections agents should highlight include:
- A broad definition of “insured persons,” which may include directors, officers, trustees, volunteers, and committee members
- Coverage for punitive and exemplary damages, where state law allows, although availability varies by state and carrier
- Defense for lawsuits tied to wrongful termination, discrimination, or breach of fiduciary duty
- Optional extensions that may cover independent community management companies, depending on the carrier
- Coverage in certain specialized programs for developers serving on the board, although this is often excluded in the broader market
Returning to the foreclosure example, a well-structured D&O policy would step in to defend the board and protect association funds. KDIS strengthens this coverage with enhancements that often go beyond what many standard policies provide.
Positioning D&O Insurance With Clients
When presenting D&O insurance, agents should frame it as more than just another required policy. It is a safeguard that helps protect leaders, supports responsible governance, and builds trust within the community.
Agents might approach the conversation by:
- Connecting proactive risk management and clean loss histories to stronger underwriting results and more favorable premiums
- Pointing out that D&O helps shield board members’ personal assets by funding defense costs and settlements within policy limits and terms
- Positioning D&O as a way to reinforce their role as trusted advisors who understand the governance and financial challenges facing community associations
Working with KDIS allows agents to offer specialized programs with enhancements that set them apart in today’s market.
Why Carry D&O for a Condo Association Board of Directors?
Even the most responsible condo association board of directors cannot eliminate risk. Allegations of mismanagement, financial errors, or unfair rule enforcement can arise unexpectedly.
Reserve funds or bylaws alone can’t absorb these liabilities. While not legally mandated in every jurisdiction, D&O insurance is widely regarded as a best practice. It protects leadership, preserves association assets, and builds community trust.
Partnering With KDIS for Stronger Condo Board Protection
Kevin Davis Insurance Services is recognized as a leader in community association insurance, serving over 40,000 associations nationwide. Our flagship D&O program offers broad definitions of insured persons, duty-to-defend provisions, and enhancements that provide expanded protection.
Agents can access applications online or work directly with KDIS specialists to secure solutions tailored to their clients’ risks. Visit our applications page to get started.
FAQ on Condo Directors and Officers Insurance
Does an HOA need D&O insurance?
Yes. Every condo association board of directors faces governance and legal risks. While not required by law in every state, D&O insurance is an important safeguard for leadership and the community. In some cases, it may be required by lenders or association bylaws.
What is not covered under D&O insurance?
D&O policies do not cover bodily injury, property damage, or intentional fraud. These exposures require other policies, such as general liability or crime insurance. Additional common exclusions may include insured-versus-insured disputes, deliberately dishonest acts, pollution, and claims tied to circumstances known before the policy began.
How much does D&O insurance cost for a condo association board of directors?
Premiums vary based on association size, claims history, location, and governance practices. While costs differ, D&O coverage is generally cost-effective compared to the significant expense of defending a lawsuit.
About Kevin Davis Insurance Services
For over 35 years, Kevin Davis Insurance Services has built an impressive reputation as a strong wholesale broker offering insurance products for the community association industry. Our president Kevin Davis and his team take pride in offering committed services to the community association market and providing them with unparalleled access to high-quality coverage, competitive premiums, superior markets, and detailed customer service. To learn more about the coverage we offer, contact us toll-free at (855)-790-7393 to speak with one of our representatives.