It took one horrific incident to reveal the risks association board members face. What are your liabilities when serving on a condo or co‑op board?
In the aftermath of a major building failure, the questions are immediate and intense. Who knew what and when? Did the board act appropriately? Could board members be held responsible for the tragedy? These concerns have grown significantly in recent years, and individuals serving on condo or co‑op boards are increasingly aware that their personal assets may be at risk.
While a catastrophic collapse is unlikely, liability extends far beyond structural failures. The legal ramifications of holding a board position are broad, and board members can be named personally in lawsuits even when acting in good faith.
Where Board Members Face Exposure
Board members can be held responsible for a wide range of issues, including:
- Pools and recreational areas: Improper chlorination, inadequate fencing, or slip‑and‑fall hazards can lead to claims of negligence.
- Building maintenance: Delaying repairs, ignoring known issues, or failing to allocate funds appropriately can expose board members to legal action.
- Malfeasance: Any alleged wrongful act — intentional or accidental — that harms another person physically, financially, or reputationally can result in costly litigation.
- Inadequate insurance: Many boards fail to review their insurance annually, leaving them underinsured and vulnerable.
Serving on a condo or co‑op board is an important way to support your community. But before accepting a position, it’s essential to understand that your decisions — or failure to act — can leave you personally liable for injuries, financial losses, or damages residents claim were caused by board negligence.
How Directors & Officers Insurance Protects Board Members
Directors and officers insurance is one of the most important tools available to protect volunteer board members. D&O insurance shields individuals from personal financial loss when they are sued for decisions made in their capacity as board members.
What D&O Insurance Covers
D&O insurance typically protects against claims involving:
- Breach of fiduciary duty
- Errors and omissions
- Failure to adhere to bylaws or governing documents
- Mismanagement of funds
- Improper maintenance decisions
- Discrimination or wrongful eviction claims
- Failure to provide adequate disclosures
These types of claims are increasingly common, especially as boards face heightened scrutiny, regulatory pressure, and expectations for transparency.
What D&O Insurance Does Not Cover
D&O insurance does not protect against:
- Criminal acts
- Fraud
- Personal gain
- Bodily injury or property damage (covered under general liability)
This is why boards must maintain a full insurance portfolio, including general liability, property coverage, umbrella/excess liability, and workers’ compensation coverage.
Why Condo and Co‑op Boards Need Directors and Officers Coverage
Condo and co‑op boards are often composed of volunteer homeowners with limited governance experience. Yet they are responsible for decisions that affect millions of dollars in property value and the safety of hundreds of residents. Board members today operate in an environment of rising complexity and public scrutiny, where even well‑intentioned decisions can lead to legal, financial, or reputational jeopardy.
Without D&O insurance, board members may be personally responsible for:
- Legal defense costs
- Settlements or judgments
- Regulatory investigations
- Claims brought by residents, vendors, employees, or other board members
A single lawsuit — even one without merit — can cost tens of thousands of dollars in legal fees.
Applying Due Diligence as a Board Member
Fortunately, many board‑related liabilities can be mitigated through proper governance and risk management. Here are four steps to ensure due diligence is achieved.
1. Understand Who You Serve
Board members serve both the association and its residents. Any aspect of running a safe, well‑maintained property can become a personal liability if neglect is proven.
2. Maintain Financial Transparency
Board members are responsible for the association’s financial health. Ensure that:
- Budgets are accurate
- Reserve studies are up to date
- Financial reports and meeting minutes are accessible to residents
- Transparency reduces the risk of claims related to mismanagement or breach of fiduciary duty.
3. Evaluate Board Operations Before Joining
Before accepting a board position:
- Review the board’s past decisions
- Assess the performance of property management
- Look for signs of deferred maintenance
- Identify any ongoing disputes or litigation
If past boards ignored issues, you may inherit that liability.
4. Review the D&O Policy Carefully
Not all D&O policies are equal. When reviewing coverage, ask:
- Does the policy cover all board members, committee members, and volunteers?
- Are defense costs included outside the limits?
- Are prior acts covered?
- Are employment‑related claims included?
- What exclusions apply?
It's important to understand policy gaps and ensure the board carries adequate limits to protect both the association and individual members.
How NFP Helps Protect Board Members
NFP provides specialized guidance to help condo and co‑op boards understand their exposures and secure the right insurance. Our experts can:
- Review existing D&O policies for gaps
- Recommend appropriate limits
- Identify exclusions that may leave board members vulnerable
- Provide personal liability solutions for individuals seeking additional protection
Serving on a board today means navigating a landscape shaped by fiduciary accountability, cybersecurity threats, governance gaps, and regulatory demands — all of which increase the need for strong directors and officers protection.
For guidance on your specific risks and coverage needs, contact us today. Our specialists can help ensure you are protected from board‑related exposures — so you can serve confidently and safely.
