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Subject: Errors and Omission Insurance

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GerryS
(Texas)

Posts:2

07/27/2008 1:23 PM
Do board members need "errors and ommission insurance"? If so can anyone recommend insurance companies. What type of liability insurance do other board members have?

BruceF1
(Connecticut)

Posts:696

07/27/2008 1:51 PM
Gerry, Sometimes this is also called Directors and Officers or D&O insurance, and yes, I would strongly urge you to carry it, even if it's a small HOA. Board members and officers can be held personally liable for their actions as board members. The purpose of D&O insurance is to pay for the defense of and any awards (up to the limits of the policy) for any claims against the board and its members resulting from their "errors" and "omissions." From what I have seen, most such policies require that board members be indemnified in the bylaws of the HOA corporation. (Do you have such a clause in your bylaws? If so, that's why it's there.) Also, you should be aware that most D&O insurance does not cover board members if they knowingly violate the law. There's an endless possibility of claims, including discrimination, failing to maintain the common elements, not enforcing the CCRs or not enforcing them fairly or equitably, failing to maintain reserves, and so on. You name it. This is not to say that all such claims always have merit, but, once someone files suit, for whatever reason, you still have to defend it.

GerryS
(Texas)

Posts:2

07/27/2008 2:32 PM
Thanks Bruce for your prompt reply. We do have the indemnification clause.

KirkW1
(Texas)

Posts:1190

07/27/2008 7:39 PM
I would not serve on the BOD without the association having Errors and Omissions (or D&O) policy. In the Dallas area it is typically referred to as D&O insurance.

GlenL
(Ohio)

Posts:1466

07/27/2008 9:02 PM
Check your CC&R's they may require it. Ours do along with requiring everyone who has access to Association fund to be bonded. I personally would not serve on a Board without either one.

JohnK3
(Pennsylvania)

Posts:565

07/28/2008 9:47 AM
Our E&O coverage is part of our general liability policy with SF, though it has to be elected and, natch, paid for.

GloriaM
(North Carolina)

Posts:778

07/28/2008 4:23 PM
Gerry: State Farm, Nationwide, Erie Insurance, Auto Homeowners Insurance are all companies that provide D&O. There are many more that provide such coverage. I would suggest 1 million in coverage. Speak with your local insurance agents to shop for the best coverage at the best rate. I have found D&O for 1 million at an annual rate of $150.00, this being the cheapest around.

Dr. Gloria J. Martinez, CFO Official HOATalk.com Sponsor Author of "A Guide to Community Living" Faith Management Services, LLC (North Carolina) (704) 799-3791 www.FaithManagementServices.com *See legal notice below (end of page) or go to www.hoatalk.com/legal

BoB1
(Texas)

Posts:1

08/28/2008 2:19 PM
Garry, Look up Associations Insurance Agency on the web. They only write insurance for Homeowners Associations & Condo Associations, and I believe they are also appointed to write exposure in any state. Just ask for a producer and they should be able to connect you.

SidneyP
(Florida)

Posts:292

08/28/2008 3:09 PM
BruseF..."Also, you should be aware that most D&O insurance does not cover board members if they knowingly violate the law." So, if the President has been told over and over about the laws she has/is breaking and she still continues to not follow the CC&R's and the Fl.SS, she is doing so knowingly and willingly...I have even sent her the Article and the SS for her to read and she has still continued to do as she pleases...and to boot our PM is not following the laws either....My problem is finding an attorney to handle a HO against a Association. She (her hand picked Board members) has placed us in such a financial hole, we will never get out....Could I just go to the insurance company and tell them what she is doing?...We do have the D&O insurance, I guess she feels safe even though I have told her otherwise. Guess she just doesn't believe me.

KirkW1
(Texas)

Posts:1190

08/28/2008 7:36 PM
Sidney, Telling the insurance company will do nothing for you. They have no power over your organization. And unless someone files a lawsuit the issue of coverage will not be considered. Part of the whole decision will be to take into consideration that the HOA and the defendant board member will in turn sue the insurance company. Consider that most lawsuits are settled long before they appear before a jury. And there if the insurance company thinks they can settle for less then they figure it will cost to fight they will do just that.

SidneyP
(Florida)

Posts:292

08/29/2008 7:23 AM
Can a Board member sue another Board member? How would the D&O insurance handle this....I have tried to make the President understand just what she is doing to the community by not following the laws of both the CC&R's and the FL.SS to know avail...for 2 1/2 years both off the Board as a HO and now on the Board as Treasurer....My complaints have be posted many times...No collection policy, there for no collection to the point of a plus $20,000. delinquency. Last month when I received the aging account there was a note on the bottom. "A late notice with the check mark has been sent a late notice...duh, most of these accounts are over $2,000, one even $3,500. that the Board has decided to write off. Our Reserves have not been funded since Apr.07...why? because the President continues to hire vendor that are costing us thousands of dollars more....Her reply to all this is we needed the money and to my question as to how these large uncalled for increases whould be paid, her reply again was "raise the dues and a Special Assessment"....I truly believe this President has lost her mind. After all she is a HO also and would have to pay these fees....So again I ask, can a Board member sue another Board member? These things plus many more have knowingly and willingly been done and are continued to be done.

JosephW
(Michigan)

Posts:787

08/29/2008 8:52 AM
"Errors and Omissions" (E&O) and "Directors & Officers" (D&O) are two different types of insurance coverage. E&O Coverage is for liability resulting from errors or omissions in the performance of professional duties. Applicable as a general rule to professional business activities such as banking, accounting, law, insurance and real estate. Your management company should carry E&O insurance. Every association should have D&O. Even though your documents may state that board members are indemnified, that may not extend to other volunteers such as committee members, who could be named in a lawsuit. D&O usually extends to volunteers in addition to the board. Also, lets say a lawsuit is brought against you after your term of office is over. The current board may not decide to indemnify you until after the trial, leaving you to front all legal costs - D&O usually defends from the first dollar. Simply put -do not serve on a non-profit board that does not provide D&O coverage, that protexts you while you serve, and after you leave office and, some policies will pay off if you lose a suit, but you will have to pay the litigation costs in the meantime. You want a policy that includes indemnity coverage for the cost of defending actions against you, and you want to make sure the policy specifies that the coverage limit does not include the defense costs; otherwise, legal expenses could eat up most of the coverage you have, leaving little to pay any judgment levied against you. Boards should also be aware that the D&O coverage many companies include as an endorsement in the insurance packages they offer community associations don’t typically cover non-monetary claims (for board election challenges, architectural review decisions, rules enforcement, and the like, which represent the majority of the liability claims most communities are likely to file. A mono-line or stand-alone policy is more expensive, but it will cover these non-monetary claims. Make sure you know exactly what is and isn't covered and for how much - get your insurance agent in to show you, in the policy, the coverages and limts. Joe

Joseph West Official HOATalk.com Sponsor Community Associations Network, LLC www.CommunityAssociations.net *See legal notice below (end of page) or go to www.hoatalk.com/legal

KirkW1
(Texas)

Posts:1190

08/29/2008 3:26 PM
Sidney, Yes you can sue your president. But understand that the HOA will be required to defend her. And the HOA's insurance will come to her aid at least until they decide that she has knowingly and willfully violated her fiduciary responsibilities. Even at that, your HOA will incur a legal bill. I wish there was an easy way out of the situation you are in. There simply isn't an easy way out.

SidneyP
(Florida)

Posts:292

08/29/2008 4:54 PM
Kirk....I just received the great news that this disfunctional President has resigned...While this is what the few HO's that live in our community wanted and that I have been fighting for for 2 3/4 years. I have said all along, that I didn'y want to hurt the HO's or the community in any way especially financially. This President has placed us in such a financial mess. Having her resign still will not erase the many things she has done to our HO's or community. The HO's don't know the situation the Association because she has never send a news letter or any financials. If you didn't come to the meeting, you received nothing....There is nothing we can do about about the Reserve fund that has not been funded since Apr.07 or the hiring of every vendor being more costly then the last. She has locked us into a 3 year contract w/the also disfunctional PM. (the one who doesn't have a CAM license) As I have stated in another post, I did send in a complaint to the DBPR. I sent copies of all her mistakes, the tax return filed late, using vendors w/no license or insurance, not seeing that the Reserves were funded or at least seeing that the HO's were informed. She should know the FL SS inside and out and know that once the Reserves were funded, they only way to stop them is through a HO vote....She should have also know that there must be a collection policy written and notice sent to HO's. We have no policy and at the last (March 31st) Board meeting the President, her clones and the PM decided to charge a late fee plus interest and make it retro to Jan....Shouldn't a PM know this?...Though some HO's paid late, they had still paid before the Board made this decision. They were charged a late payment anyway....Please all pray that the DBPR will do something about this and we can get out of our 3 year contract. The lawn service (friend of PM)the President and her clones voted in at $5,000. more per year than we were paying. Again, let me remind you, there is no money to meet these expenses (this is why no Reserves, they took the $10,000. to pay bills)..This is the worst lawn service we have ever had. They have done our lawn 3 times, three times have received complaints. 1)after three (3) days of rain and still raining, they cut the grass, leaving large ruts in the yawn. 2)they missed cutting serveral yards (one being mine)I found him and told him to come back, he did, he cut my entire back yard w/a weedeater. 3)Wish I could send pictures, they cut the grass so low and the mower out of line, that it was down to the dirt in some places and near scalped on one side of every swipe w/the mower..So hopefully we can get rid of this new company too. The PM has e-mailed the Board w/this resignation information and told the VP, he is now President. As stated before, he lives in Mass. I'm open for any suggestions that can help us pull our community out of this mess....And Kirk can I now sue this past President w/o costing the HO's or Association....Sorry, I went on so long.

KirkW1
(Texas)

Posts:1190

08/29/2008 6:09 PM
While you might talk with an attorney, the association could still end up with a legal bill. The thing is that indemnification is for all acts while in office even after one leaves office. And the same goes for the insurance. The other thing is that at least in theory a majority of quorum went along for the ride and can be implicated as well. Now if it can be established that she was acting on her own behalf, you have a horse of a different color as they say...

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