QUESTION:
Can a director be sued by homeowners after his/her term of service?
Does D&O insurance protect only current directors or does it cover
former directors as well?
ANSWER:
Yes, former directors can be sued for actions they took while on the
board. Unfortunately, too many plaintiffs (and
their willing lawyers) file lawsuits for dubious reasons. As a result,
it is important that boards purchase a good
Directors & Officers (D&O) liability insurance policy.
Coverage. D&O insurance covers current and past directors,
provided the
policy is "claims made" and not "occurrence" based. A claims made
policy means that coverage
is determined as of the date the claim is made, not when the alleged
act occurred. As a result, claims made against former directors would be
covered. Good policies broadly define "named insured." Attached is a
typical
definition. Boards should check their policies to see how "named insured" is defined.
ASSISTANCE: Associations needing legal assistance can
contact us.
To stay current with issues affecting community associations, subscribe to the
Davis-Stirling Newsletter.