Directors & Officers coverage
What protects your board when someone sues over a decision, not an accident.
Directors and Officers (D&O) coverage protects your board members personally when someone sues over a decision the board made, such as alleged mismanagement, wrongful termination, or a denied architectural request. General liability does not cover this. Most D&O policies are claims-made, and nearly all carry the same four standard exclusions.
Why general liability doesn't cover this
Your association's general liability policy is built around the common areas and the association's routine activities, not around what the board decided in a meeting.
"designed to help protect the HOA when a claim arises from the ownership, maintenance, or use of common areas, or from the normal activities of the association"
Source: HOA General Liability: What Premises and Operations Really Covers, StarNet Insurance Group
Board decision disputes, employment claims, and employee injuries are typically excluded from that same general liability policy, which is exactly the gap D&O is built to fill. See General liability for the full picture of what that policy does and does not cover.
D&O runs on a claims-made trigger, not an occurrence one
Most community association D&O policies respond based on when a claim is filed, not when the disputed decision happened.
"Almost all D&O coverage is 'claims-made,' though some may be 'occurrences.'"
Source: Community Association Insurance Manual, Epsten, APC
That distinction matters most when a board switches carriers. Read Claims-made policies and Occurrence policies before your next renewal so a gap in coverage doesn't surprise you.
Four exclusions nearly every D&O policy shares
Community association D&O policies commonly carry the same four "universal" exclusions: fraud or criminal acts by a director, bodily injury and property damage claims (those belong to other policies), anything a director already knew about before the policy started, and an insured versus insured exclusion that bars coverage when the association sues a current or former director.
That last exclusion surprises boards the most. If the association itself brings the claim, such as pursuing a former treasurer for mismanagement, the D&O policy typically will not pay that director's defense. Exactly how each exclusion is worded, and how narrowly or broadly the insured versus insured exclusion applies, varies by carrier and by your specific policy. Ask your broker to walk through your policy's exact wording before you rely on it.
Check yourself
Answer before you read the explanation, recalling it is what makes it stick.
A resident sues the board, alleging the board's denial of their architectural request was discriminatory. Which policy is built to respond?
The board switched D&O carriers this year. A resident sues over a board vote from two years ago. What decides whether the new policy responds?
The association votes to sue a former treasurer for mismanaging funds. Does the D&O policy typically cover that former director's defense?
Sources
- HOA General Liability: What Premises and Operations Really Covers, StarNet Insurance Group
- Advising Community Associations on D&O Coverage Limits and Exclusions, Kevin Davis Insurance Services
- Community Association Insurance Manual, Epsten, APC
Related elsewhere in the Academy
Insurance
Next, learn how a claims-made trigger actually works so a carrier switch never catches your board off guard: Claims-made policies.
Whether your D&O policy is claims-made or occurrence, how "prior knowledge" is defined, and how broadly the insured versus insured exclusion reaches all vary by carrier and by your specific policy wording.