On October 14, 2011, Corey Harris explained Florida’s standard of director’s liability in his blog post, Am I Personally Liable Simply For Being A Director? As he noted, “[t]he longstanding precedent discussed in Munder v. Circle One Condominium, Inc., 596 So.2d 144 (Fla. 4th DCA 1992), provides that directors are immune from individual liability unless a crime or fraud has been committed or there has been self-dealing or unjust enrichment. As a result, negligent actions are not individually actionable, even if such actions are clearly wrong.”

Serving as a director or officer of an association is important. It takes time, energy, and resources. Every association needs intelligent and capable people on its board and as its directors. It is a privilege to be offered such a position and gives many people the opportunity to serve their community faithfully and with due care. Unfortunately, accusations and mistakes occur, so one of the most important things an association can do is provide its directors and officers with liability insurance.

The two most common types of directors and officers liability policies (“D&O”) for homeowner associations are package policies and stand-alone policies. A package or master policy usually provides property, general liability, crime, and other coverages, including D&O liability coverage. Usually, if the package policy provides D&O coverage, it is more limited than a stand-alone policy. It is advantageous for associations to provide independent D&O policies to verify sufficient coverage.

It is just as important to understand D&O policies to ensure proper claims handling if the need arises. Most D&O liability policies provide coverage on a claims-made basis. This typically means that the policy in effect when the claim is presented is the policy that pays the claim, subject to certain limitations.

Before deciding to serve as a director or officer of an association, it is important to find out if the association has D&O coverage. The next step is to make sure sufficient coverage exists. If it is just a part of the package policy, I recommend seeking an additional claims-made policy. The additional liability coverage very well may prevent problems for you in the future.

Next week, I am going to explain two major limitations that may have an impact on coverage under claims-made policies.