In our increasing litigious society, Directors and Officers Liability Insurance is one of the most important insurances and a necessity for condominium and cooperative Board Members. Here are all the details you need to be aware of.
The most common Directors and Officers Liability lawsuits logged in New York and New Jersey are:
- Wrongful termination of an employee
- Discrimination because of race, religion, sex, or disability
- Defamation of character such as libel or slander
- Breach of contract by a third party vendor
- Renovations by the building or homeowner
- Noise by another homeowner, a contractor, or the building’s machinery
- Subletting guidelines and restrictions
- Pet guidelines and restrictions
Comprehensive Directors and Officers Liability policy forms are purchased on a standalone basis, meaning that the coverage is a separate insurance policy. The weaker coverage forms are generally the ones embedded in the Commercial Package or General Liability policy.
The comprehensive, standalone policy will usually respond and provide coverage for the costs of legal defense of law suits. Claims are made up of defense fees, claim expenses, and litigation costs.
What makes a standalone policy more comprehensive
- The standalone policy provides coverage for all persons such as elected or appointed directors, trustees, officers, employees, committee members, and current or past volunteers
- The embedded form in the package policy usually only covers the directors and officers who are or will become directors or officers during the policy period
The major differences that the board needs to be aware of
Most embedded Directors and Officers Liability policies will not provide coverage for major claims that the Board will be sued for. These lawsuits are for:
- Discrimination because of race, disability, religion, employment etc.
- Non-monetary damage lawsuits: some instances that could result in non-monetary damage lawsuits include approval or rejection of contracts and the interpretation of bylaws
- Personal injury lawsuits such as libel, slander, and defamation of character
If your cooperative or condominium doesn’t already have comprehensive D&O insurance and you are on the board, now is the time to invest in the right protection! Like the old adage says, “an ounce of protection is worth a pound of cure”.