D&O Insurance for Community Association Board Members: A Practical Guide

Serving on your community association's board of directors is a volunteer position. Nobody's getting paid. Most board members step up because they care about their community and want to make sure things are run properly.

What many don't fully appreciate until they're already serving is that the position comes with real legal exposure. Board members owe fiduciary duties to the association and its members, and when someone believes those duties weren't met, the result is often a lawsuit — regardless of whether the allegation has merit.

That's where directors and officers (D&O) insurance comes in. It's not glamorous coverage. It doesn't protect the building or the pool deck. But for the volunteers who govern your association, it may be the single most important policy in your program.

What D&O Insurance Actually Covers

D&O insurance protects individual board members, officers, committee members, and the association entity against claims alleging wrongful acts in the governance of the association.

"Wrongful acts" is a broad term that typically includes:

• Breach of fiduciary duty — a unit owner claims the board mismanaged association funds or failed to act in the association's best interest
• Failure to maintain the property — a claim that the board's neglect of maintenance led to property damage or decreased property values
• Improper use of funds — allegations that reserve funds were misappropriated or that special assessments were improperly levied
• Discrimination — claims of selective enforcement of rules, ADA violations, or fair housing violations
• Failure to enforce governing documents — an owner claims the board isn't enforcing CC&Rs consistently
• Defamation — a board member's statements about a resident (in a board meeting, newsletter, or email) are alleged to be defamatory

The policy covers two critical things: defense costs (attorney fees, expert witnesses, court costs) and settlements or judgments if the claim results in a financial resolution.

Defense costs alone can easily reach $50,000-$100,000+ for a contested lawsuit. Even when the board ultimately prevails, the cost of getting to that outcome is substantial. Without D&O coverage, those defense costs are either paid from association funds (reducing reserves and potentially requiring a special assessment) or, worse, borne personally by the individual board members.

What D&O Does NOT Cover

Understanding the exclusions is just as important as understanding the coverage:

• Intentional fraud or criminal acts — if a board member embezzles funds, D&O doesn't protect them
• Personal profit or advantage — if a board member steers a contract to their own company, that's excluded
• Bodily injury or property damage — these are covered under your general liability policy, not D&O
• Professional services — if a board member who is also an architect provides professional design advice to the association, their professional liability isn't covered
• Prior known claims — claims the insured knew about before the policy period are typically excluded

Most D&O policies are written on a claims-made basis, meaning they respond to claims that are made (filed) during the policy period, regardless of when the alleged wrongful act occurred — subject to a retroactive date. If your association switches carriers, make sure the new policy's retroactive date provides continuous coverage.

What Florida Law Protects (And Doesn't)

Florida provides some statutory protection for volunteer board members. Section 617.0834 of the Florida Not For Profit Corporation Act limits liability for officers and directors of nonprofit corporations (which includes most community associations) when they act:

• In good faith
• In a manner they reasonably believe to be in the best interest of the corporation
• Without willful or wanton disregard of human rights, safety, or property

There's also the federal Volunteer Protection Act, which provides similar protections for volunteers of nonprofit organizations.

These sound reassuring, but they have critical limitations:

They don't prevent lawsuits. Statutory protection is a defense that must be raised in court. Someone can still file a lawsuit against board members, and the board members still need to pay for legal representation to assert the statutory defense. A lawsuit that's ultimately dismissed still costs money to defend.

The exceptions are broad. Willful or wanton disregard, gross negligence, and actions outside the scope of duties are all excluded from protection. In a contested lawsuit, the plaintiff will almost always allege that the board's conduct falls outside the statutory protections.

They don't cover the association entity. Statutory protections generally apply to individual volunteers, not to the association itself. Claims against the association entity are not covered by volunteer protection statutes.

D&O insurance fills the practical gap that statutory protections leave open. It provides the actual money to pay for defense, regardless of how the statutory protection arguments play out.

Fidelity Bond: The Companion Coverage

Most associations carry their fidelity bond (also called employee dishonesty or crime coverage) alongside D&O, sometimes bundled in the same policy. While D&O covers governance decisions and alleged wrongful acts, fidelity coverage protects against theft and fraud by people who control association funds.

Florida Section 718.111(11)(d) requires condominium associations to maintain fidelity bonding covering all persons who control or disburse association funds. The coverage amount must equal the maximum funds that will be in the custody of the association or its management agent at any one time.

This means your fidelity bond limit should reflect:

• Operating account balance (at peak, often right after quarterly assessments are collected)
• Reserve fund balance
• Any special assessment funds being collected
• Other association funds

A common problem: the fidelity bond was set five years ago when the association had $500,000 in reserves. Today the reserves have grown to $1.5 million, but the bond limit hasn't changed. If a loss occurs, the association is exposed for the difference.

Employment Practices Liability (EPL)

If your association has employees — maintenance staff, a resident manager, front desk personnel — your D&O policy should include Employment Practices Liability coverage. EPL covers claims by employees alleging:

• Wrongful termination
• Sexual harassment
• Discrimination (age, race, gender, disability)
• Retaliation
• Hostile work environment

Not all D&O policies include EPL automatically. If your association has even one employee, verify that EPL is included in your D&O coverage. Employment claims are among the most expensive to defend, even when the association ultimately prevails.

Questions for Your Board

Before your next D&O renewal, make sure your board can answer:

1. What's our D&O limit, and is it adequate for the size and complexity of our association?
2. Does our policy include EPL? If we have employees, this is essential.
3. What's our fidelity bond limit? Does it match our current peak fund balance?
4. Are committee members covered, or just named directors and officers?
5. Is there a prior acts (retroactive) date that could limit coverage for events before a certain date?
6. What's the retention (deductible)? Who pays it — the individual board member or the association?

Nobody joins a condo board expecting to get sued. But understanding the coverage that protects you when it happens is part of being a responsible board member.

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