This month, we take a look at the Directors & Officers policy. As a liability policy, it serves to defend the board of directors should someone file a lawsuit against them. I know, the thought of someone being so offended by something a community association board says or does that they sue is ridiculous (just a tad bit of sarcasm, there). But just in case the unthinkable happens, this is a good policy to have in place. Oh, and it is also a requirement of the Davis-Stirling Act in order to protect the board members from being sued individually.

People often ask “what can board members do to protect themselves from lawsuits and D&O claims?” The simplest answer is transparency. If a board communicates with the membership and keeps everyone in the loop with what is going on with the association, folks are less likely to sue. Boards that are seen as secretive are more likely to run into issues.

Take, for example, the current climate of insurance. Many associations are seeing drastic increases in their premiums. Associations located in high wildfire hazard areas are being non-renewed and are having difficulty even finding full coverage. If they do, the premiums are often astronomical.

If the board communicates the situation, as dire as it is, and lets everyone know the steps they are taking to correct it, members are less likely to think the board is keeping secrets or trying to dupe the membership. Of course, crafting communications in delicate situations should be run past counsel first.

Communication with your experts is also important in avoiding claims. Talking to your attorney, insurance professional, CPA, etc., can show that the board has done their due diligence and help to add weight to the communications they have with the membership.

Terri Guest, CIRMS, CMCA, EBP, is the Northern California Sales & Marketing Representative for Berg Insurance Agency and can be reached at terri@berginsurance.com.