What HOAs Need to Know About Directors & Officers Insurance

Homeowners association (HOA) leaders face potential risks in their day-to-day operations, including legal actions arising from decisions or management lapses. Without D&O insurance, directors and officers may bear personal financial burdens. 

This coverage can be a crucial safety net, offering protection and fostering confident decision-making within HOAs. It mitigates financial fallout and safeguards individuals against potential legal consequences, ultimately supporting HOAs’ stability and well-being. 

As an insurance agent, you can help HOAs understand and appreciate the role of directors and officers insurance in shielding board members from personal liability. This article explores the ins and outs of d&o insurance in protecting HOA leaders and ensuring the community’s effective governance.

Common Risks to HOA Directors and Officers

HOA directors and officers in an HOA face various risks that necessitate comprehensive insurance coverage. For example, an overlooked common area could open the board to liability claims for injuries, property damage, or reduced property value claims.

Additionally, board members have a fiduciary duty, which demands they act in the best interest of the community and the association. Failure to adopt an annual budget or misuse of association funds put the board at risk of claims associated with a breach of their fiduciary duty. The right D&O insurance policy will protect the association and the community from the financial burden of these claims.

Importance of Securing Adequate Coverage

Unlike general liability insurance, which primarily covers the HOA organization, D&O coverage protects individual board members from personal liability risks. 

HOAs should review their coverage, risk factors, and potential exposures with insurance professionals to ensure comprehensive coverage for potential legal challenges. Collaborating with insurance professionals allows for tailored coverage that aligns with the specific dynamics of the community, fostering a proactive and resilient approach to risk management within HOAs.

What Does D&O Insurance Cover?

Directors and officers insurance primarily covers the association’s board members, protecting them from the personal liability risks of their managerial decisions. 

Depending on the policy, coverage might extend to some employees, committee members, volunteers, and other individuals named explicitly in the declaration pages. Determine the policy coverage limits according to the risk level that each committee member faces to tailor coverage based on their unique needs. 

Make sure your HOA clients also understand the policy exclusions so they recognize any potential risk exposures. For example, many policies exclude coverage for illegal actions or deliberate neglect.

Shielding HOA Leadership

The more you understand how directors and officers insurance helps your HOA clients, the easier it is to tailor a policy to their specific needs, including coverage limits, policy endorsements, and gap coverage for exclusions. 

Talk with your clients about the risk factors they face based on their operation so you can identify the right coverage. Kevin Davis Insurance Services can help you find the coverage you need for your clients. Contact us today for more information.

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.