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The Importance of D&O Insurance Coverage

If a homeowner’s association is new, and has just formed a board of directors, one of the first orders of business should be to purchase Directors and Officers Insurance. It is also important, for those considering serving on a board of directors in well established communities, to make sure that D & O Insurance is in place.

Why is this so important? A director or officer for the association can be held personally responsible for their actions, and decisions made for the association. Because of this, members of the association may be reluctant to serve on the board, fearing that their personal assets would be at risk. The Directors and Liability coverage helps protect personal assets for each director and officer from litigation, due to alleged mismanagement of the association, in the event they are sued while performing their duties, as they relate to the association. This coverage will also provide money to obtain legal counsel if needed.

Directors and Officers Liability Insurance may also include employment practice liability and fiduciary liability. If your association has employed someone to run the clubhouse or other facility in the community, this could open the association to possible employment practice lawsuits.

Serving on the board of a homeowners association is a great responsibility, and it comes with unique risks. All board members of homeowners associations have a fiduciary responsibility to the homeowners in their association. Their decisions have a great impact on the entire community and should benefit and protect the association and its assets.

Each member of the board should take the time to review the insurance coverage, and meet with a qualified insurance agent, to insure that your association has the best coverage for your community. Your community manager can help with this process and work with the agent to obtain competitive insurance rates.

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