Understanding the Importance of Directors & Officers Liability Insurance in Community Associations

Community associations can be volatile, and board members may face lawsuits. Their status as volunteers working for a nonprofit does not indemnify them from potentially costly legal suits. Community associations deal with this threat by carrying directors & officers liability insurance. This specialized coverage is essential for the financial security of association officers and directors. 

The Role of Directors and Officers Liability Insurance 

Community association boards turn to directors and officers liability insurance as a pivotal safeguard against lawsuits that could devastate the finances of both individuals and the organization. Directors and officers liability, often called D&O liability insurance, protects organizational assets when board members, employees, managers, or committee members make errors. It also protects them when someone charges them for failing to meet community association responsibilities. 

Even if an association has policies to indemnify board members and directors or has enough funds to cover legal costs, this insurance is vital for long-term protection. Good D&O coverage protects against multiple scenarios, including:

  • Challenges to architectural decisions
  • Claims of discrimination 
  • Disputes of elections
  • Challenges over a lack of flood insurance for tenants and owners

This insurance also protects against disputes over no-grill policies, property gates, and safety measures such as lighting. Directors and officers liability insurance protects boards and their members against these claims should they go to court. 

As litigation against community associations and their representatives becomes more common, carrying a solid D&O policy is integral to risk management for community association boards. 

Things Your Clients Should Know About Directors and Officers Liability Insurance

Directors and officers liability insurance (D&O) is essential for businesses, protecting directors, officers, and executives from legal and financial risks. As an insurance agent, you must educate your clients about the benefits and significance of D&O insurance. Understanding its value allows clients to make informed decisions to safeguard their company’s leadership team and personal assets.

One key aspect to emphasize is that D&O insurance provides financial protection to directors and officers when facing allegations of wrongful acts in their managerial roles. These acts can include breach of fiduciary duty, mismanagement, negligence, or even employment-related claims. With D&O coverage, clients can mitigate the financial burden of legal defense costs, settlements, and damages. Highlight that even the most diligent and well-intentioned executives can face legal actions, making D&O insurance an essential risk management tool.

It’s crucial to explain to clients that D&O insurance not only safeguards the personal assets of directors and officers but also helps attract and retain top talent. Talented individuals often seek positions where they can have the confidence that their personal assets won’t be at stake due to decisions made in their professional capacity. By offering D&O insurance as part of their benefits package, clients can demonstrate their commitment to protecting their leadership team, which can enhance their reputation and competitiveness in the marketplace.

Types of Directors and Officers Liability Insurance

Community associations may want to add endorsements to current policies to protect against D&O-related claims. However, a dedicated, standalone policy for directors’ & officers’ liability insurance is the surest way to protect against potentially devastating losses. 


Directors and officers liability insurance plays a crucial role in safeguarding the financial security of community associations and their board members. This specialized coverage offers protection against potential lawsuits that could have devastating consequences for individuals and the organization as a whole. As litigation against community associations becomes more common, carrying a solid D&O policy is integral to effective risk management for community association boards. From challenges to architectural decisions to disputes over safety measures, D&O insurance provides comprehensive protection, ensuring that community associations can continue to operate with confidence and stability.

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.