Corporations Code. The Corporations Code provides that even though officers and directors are fiduciaries, they can make poor decisions that result in damage or loss, but still avoid personal liability if they performed their duties:
- In good faith,
In a manner which the director believes to be in the best interests of the corporation, and
With such care, including reasonable inquiry, as an ordinarily
prudent person in a like position would use under similar circumstances. Corp. Code §7231(c).
Davis-Stirling Act. As provided for in
Civil Code §1365.7(a), a
volunteer officer or director is not personally liable in excess of the association's insurance for bodily injury, emotional distress, wrongful death, or property damage or loss as a result of the tortuous act or omission of the officer or director if all of the following criteria are met:
The act or omission was performed within the scope of the officer's or director's duties.
The act or omission was performed in good faith.
The act or omission was not willful, wanton, or grossly negligent.
The association maintained and had in effect at the time the act or omission occurred
and at the time a claim is made one or more policies of insurance which
shall include coverage for (A) general liability of the association and
(B) individual liability of officers and directors of the association
for negligent acts or omissions in that capacity; provided, that both
types of coverage are in the following minimum amount:
At least $500,000 if the association consists of 100 or fewer separate interests;
At least $1,000,000 if the association consists of more than 100 separate interests.
Lamden Decision. Board decisions cannot be second-guessed by members or the courts, even if a reasonable person would have acted differently, provided the board acted (i) in good faith, (ii) in the best interests of the association, and (iii) upon reasonable investigation.
Lamden v. La Jolla Shores.
RECOMMENDATION: Rather than suing the board because a member disagrees with a particular decision, members should run for election at the next annual meeting or
recall the board.