Insurance basics: D&O, general liability, fidelity bond

Every Florida HOA and COA board buys insurance every year, and every Florida HOA and COA board has at least a couple of directors who never read what the policies say. That's usually fine — until the day a loss comes in and the board discovers that the coverage they assumed was there isn't.

This article is the basics on the three insurance coverages every board must understand: Directors and Officers (D&O) liability, Commercial General Liability (CGL), and the fidelity bond. Property and windstorm coverage is a separate article.

Directors and Officers (D&O) liability

D&O is the policy that protects the volunteer directors and officers personally — and the association's entity itself — against claims arising from board decisions and actions taken in the official capacity.

What it covers

Typical D&O coverage includes:

• Defense costs and indemnity for claims of breach of fiduciary duty
• Claims of mismanagement, wrongful acts, errors or omissions in board decisions
• Wrongful employment-practices claims (depending on coverage form)
• Discrimination claims (depending on coverage form)
• Securities-related and corporate-law claims (rare for community associations but covered)

What it typically does NOT cover

• Bodily injury or property damage (that's CGL)
• Theft or fraud by board members or staff (that's the fidelity bond)
• Acts of bad faith or willful misconduct (the policy expressly excludes them)
• Claims for which there is "known" prior wrongful conduct
• Punitive damages in some jurisdictions

How much you need

For most Florida HOAs and COAs, D&O limits of $1M per claim and $1M aggregate is the floor. Larger or higher-risk associations should carry $2M to $5M, and any association involved in active litigation or with a recent loss history should ask the broker for higher limits.

The board-member-vs-board lawsuit gap

The single most common D&O coverage gap: a former board member sues the current board, or a current board member sues the rest of the board. Many older D&O policies have an "insured vs. insured" exclusion that pulls coverage in this scenario, even though the dispute is exactly the kind that D&O should cover.

Modern community-association D&O forms typically carve out exceptions for member-derivative claims and for certain officer-vs-officer disputes. Ask your broker, in writing, whether your policy's insured-vs-insured exclusion has these carve-outs.

Retroactive date

D&O is typically written on a claims-made basis with a retroactive date. The retroactive date is the earliest date on which a wrongful act can have occurred and still be covered. If your retroactive date is 2024 but the alleged wrongful act occurred in 2022, you have no coverage.

Watch this when changing carriers. Continuity of retroactive date is the broker's job; if the broker pushes a renewal that resets the retroactive date forward, push back.

Commercial General Liability (CGL)

CGL is the policy that protects the association against claims for bodily injury or property damage to third parties arising from the operation of the association and its premises.

What it covers

• Bodily injury claims (slip-and-fall, swimming-pool incident, recreational-area injury)
• Property damage to third-party property caused by the association's operations
• Defense costs for covered claims
• Personal and advertising injury (defamation, libel, slander in some forms)

What it typically does NOT cover

• Property damage to the association's own property (that's the property policy)
• Damage from a known prior occurrence
• Claims arising from professional services (the association doesn't typically have this exposure, but be aware)
• Auto liability (that's a separate auto policy if the association owns vehicles)

How much you need

CGL limits of $1M per occurrence / $2M aggregate is the typical floor. Most associations carry a $3M-$5M umbrella policy on top, which is cheap and provides meaningful protection against the catastrophic claim.

Additional insureds

Anyone the association contracts with should name the association as additional insured on their own CGL. Review every vendor contract. Confirm via the COI. (See the separate article on vendor verification.)

Pool and recreational-facility exposure

The single highest-frequency CGL exposure for most Florida associations is pool and recreational-area incidents. Coverage typically includes these, but the underwriting matters — older pool installations without compliant safety equipment, unsupervised pools, alcohol service at pool events, all affect coverage.

Fidelity bond

The fidelity bond (sometimes called crime insurance or employee dishonesty coverage) protects the association against theft, fraud, or other dishonest acts by employees, officers, directors, and (in modern forms) the property management company.

What it covers

• Theft of association funds by an officer, director, or employee
• Embezzlement by the property manager or other contracted service provider
• Forgery and check fraud
• Computer fraud (depending on form)

What it does NOT cover

• Mistakes, errors, or omissions (that's D&O)
• Losses caused by a person who has not been named or whose role is not covered
• Losses discovered after the policy's discovery period has run

How much you need

Florida Statute 718.111(11)(a) requires condominium associations to maintain fidelity insurance in an amount at least equal to the maximum funds, including reserves, that will be in the custody of the association or its management agent at any one time. Florida Statute 720.3033(1) imposes a similar requirement on HOA officers.

Read this requirement carefully. The bond limit must equal the maximum cash position — operating plus reserves combined — at any point during the year. Many associations carry only an operating-cash-sized bond and are statutorily non-compliant.

If you have $400,000 in operating cash and $1.6M in reserves, the bond limit must be at least $2M.

Discovery period and notice

Fidelity bonds typically have a discovery period — losses must be discovered within a stated period after the loss event for coverage to apply. The period varies from 12 months to several years. Periodic audits by your CPA help catch losses within the discovery period.

The notice requirement is tight. Most bonds require notice within a few days of discovery. A board that finds out about a theft, hires counsel, investigates, and only then notifies the carrier is at risk of forfeiture.

How to read your policies

You don't have to be an underwriter. You do have to be able to answer five questions about each policy:

1. What does it cover?
2. What does it not cover (the key exclusions)?
3. What's the limit?
4. What's the deductible / retention?
5. What's the notice requirement when a claim arises?

Schedule an annual broker review where the broker walks the treasurer and one other director through these questions for each policy. Document the conversation. The broker's sign-off in writing that the program is current and adequate is what your defense counsel needs if a coverage gap shows up later.

The three habits that distinguish well-insured boards

1. Annual broker review with a written summary. Not "yeah we're good on insurance" — an actual document.
2. A claims-protocol document on file. When a loss happens, who notifies whom, in what order, on what timeline.
3. A coverage matrix. A one-page summary listing each policy, the carrier, the limit, the deductible, the renewal date, and the notice contact. Update it annually.

Common Elements articles are educational and not legal advice. Consult a licensed Florida attorney or insurance broker before making decisions that affect your association.