Adams Stirling PLC


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.

Adams Stirling PLC