Adams Stirling PLC


QUESTION: Our HOA provides $1 million in D&O insurance for each board member. However, our board president takes out extra personal liability insurance because he serves on our board and charges the association almost $1,000.00 annually for the added insurance. Is this a common practice?

ANSWER: No, providing extra personal liability insurance for the president is not a common practice. Moreover, unless the board approved the expense (by motion and vote at a properly noticed open meeting of the board which has the item on a published agenda), the president must pay for the insurance out of his own pocket. If the board wants extra D&O coverage for directors, it should talk to the association's insurance agent. The board can probably get better coverage for the entire board at a better price than what your president obtained personally.

Personal Umbrellas. Personal umbrellas like the one purchased by the president often refer to "serving on a non-profit board," which usually means serving on a tax-exempt 501(c) organization and not the board of a CID. Depending on the president's personal underlying policy (HO-6 for a condo/co-op or HO-3 for a planned community), there may only be coverage for bodily injury and property damage but not for personal injury. There will be no coverage for "wrongful acts," which is what the association's D&O is for. As a result, the president's extra insurance is of minimal value.

ASSISTANCE: Associations needing legal assistance can contact us. To stay current with issues affecting community associations, subscribe to the Davis-Stirling Newsletter.

Adams Stirling PLC