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Subject: D&0 insurance .. do they companies every pay out
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Author Messages
LaskaS
(Texas)

Posts:92


10/02/2018 3:17 PM  
hi,, I know every d&o insureance policy is different, I'm asking a general question.


If clear violations of procedure and bylaws are discovered ..the new board discovered this about the old board.

these violations resulted in hundreds of thousands of dollars being paid out to vendors. despite now finding out that they billed for work that was not done.
Rather, than presenting the invoices to the board, so that verification of work done, and quality of work could be checked, the president input the invoices into our 3rde party payment system,(strongroom).
This violates the requirement for all actions and decisions of the hoa come from a board vote..

there are literally dozens of other violations of the bylaws, declaration and texas property code..

Many of them resulted in the association losing hundreds of thousands of dollars over a 6 month period..

Some of the money was for ill advised work.. I know we won't get that back.. because as i understand, the board has a right to make bad decisions.. but they don't have a right to make decisions and spend money that is outside of their legally defined authority..

If the board did spend money on things that were supposed to be the homeowners responsibility... will the d&o cover that.

If the board approved payments on invoices without checking or verifiying the work,,and it turns out many of the invoices were bogus,,,, would insurance cover that

If the president brought in a contractor, that did not go through the bidding process and was not vetted by the entire board.. .. and this contractor had a severely reduced scope of work but charged more money... will insurance cover that..

the new board is in the process of hiring a forensic auditor. I know the hoa can also pursue legal channels to get money back that was paid for work that was not done.. but I am wondering if the d&0 insurance is also a valid channel to pursue to recoup some of the money....

MelissaP1
(Alabama)

Posts:7767


10/02/2018 5:52 PM  
That is not what this insurance works or is for. IF the board member is acting as part of the HOA, then they aren't liable personally. Plus if a claim was made, then it could raise insurance rates or risk losing the policy altogether.


Former HOA President
RoyalpitA


Posts:0


10/02/2018 6:32 PM  
You are asking legal questions.

You would be better served to ask them of an actual attorney.

Your posting of possible 'case information' on the internet 'might' come back to bite you.
RoyalpitA


Posts:0


10/02/2018 6:44 PM  
Posted By MelissaP1 on 10/02/2018 5:52 PM
That is not what this insurance works or is for. IF the board member is acting as part of the HOA, then they aren't liable personally. Plus if a claim was made, then it could raise insurance rates or risk losing the policy altogether.





ABSOLUTELY INCORRECT

however

IF the board member is acting as part of the HOA [and acting in good faith and using 'ordinary business judgment' and following the bylaws and performing their Fiduciary Duty] then they aren't liable personally.

malfeasance = personal liability = no D&O coverage

nonfeasance = personal liability = no D&O coverage

misfeasance = errors made in spite of 'good judgment' = D&O pays and indemnifies


The above may not be 'technically correct' but gives the 'essence' of what D&O does.
DouglasK1
(Florida)

Posts:1281


10/02/2018 7:24 PM  
I'm sure D&D insurance pays out occasionally, but I doubt is is as simple as filing a claim and waiting for a check.

I would expect that you would have to sue the directors, and if the insurance company determined that the suit was for something covered under the policy, they would provide legal defense, and pay in the event of the plaintiffs prevailing.

Escaped former treasurer and director of a self managed association.
LaskaS
(Texas)

Posts:92


10/02/2018 9:21 PM  
what about breach of fiduciary duty,,specifically the duty of care


like i said,, We have proof that the former president did not validate the invoices or verify that the invoices were for work that was actually done.. she paid them anyway..
RichardP13
(California)

Posts:3139


10/02/2018 10:12 PM  
Posted By MelissaP1 on 10/02/2018 5:52 PM
That is not what this insurance works or is for. IF the board member is acting as part of the HOA, then they aren't liable personally. Plus if a claim was made, then it could raise insurance rates or risk losing the policy altogether.




What planet do you live on?
RoyalpitA


Posts:0


10/03/2018 4:30 AM  
earth v.55+
ND
(PA)

Posts:213


10/03/2018 5:01 AM  
Alabama
TimB4
(Virginia)

Posts:16050


10/03/2018 5:06 AM  
Laska,

D&O insurance would pay to fight the case in court and, if ordered by the court, pay out judgement based upon terms of the policy. The Association would have to pony up the deductible and any judgement not covered by the insurance.

That said, from what you describe, the issue would be:


1) Bring legal action against the Association and the individual owners who benefited so a court can rule who has to pay.
2) Prove in court that the payments should not have been paid.


As others have pointed out, it will be difficult to make the Directors themselves pay (unless they benefited from the work done) because you will have to pierce the corporate shield and overcome the business judgement rule defense.
MelissaP1
(Alabama)

Posts:7767


10/03/2018 5:14 AM  
Was being from Alabama an insult? Because Alabama isn't an insult. It's Roll Tide Baby!

Former HOA President
RoyalpitA


Posts:0


10/12/2018 5:06 AM  
Are you, or are you not, from Alabama ?

Why would you consider a mere statement of fact to be a potential insult ?

? Because you are from Alabama ?

! Merely asking a question
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