Protection Against Liability
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PROTECTION AGAINST LIABILITY

Volunteer officers and directors are afforded protections against personal liability. Such protections are necessary otherwise it would be nearly impossible to recruit people to serve on association boards of directors. Protections against legal exposure are extended to directors as follows:

1. D&O Insurance. Directors and Officers insurance protects against errors and omissions made while in office.

2. Statutory Indemnity. The Davis-Stirling Act protects volunteers from personal liability while on the board of directors provided they meet certain criteria. (Civ. Code §5800; Corp. Code §5047.5(b).) Directors and officers can also be indemnified by their association if they had no reasonable cause to believe their conduct was unlawful. (Corp. Code §7237.) The Corporations Code extends further protections under the Business Judgement Rule.

3. Governing Documents. Typically, an association's CC&Rs and bylaws both contain exculpatory language as well as hold harmless and indemnity provisions protecting officers and directors from liability for negligent acts and omissions while in office.

4. Case Law. Directors of an association have no vicarious liability for torts of the association, even though they, unlike a member that has only a single vote, are the policymakers that control the association's conduct. (Frances T. v. Village Green Owners Assn. (1986) 42 Cal. 3d 490, 504.) Directors of an association cannot be held liable as individuals unless they personally participated in a wrongful action. (Id. at pp. 503-506.)

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