News from Brownstone Insurance

News from
Brownstone Insurance

200 Cordwainer Drive
Norwell, MA 02061

(617) 236-6400

www.brownstoneinsurance.com

Dear Brownstone customers,

As many of you either live in or manage condominium or apartment complexes, you are familiar with the associations and boards of directors that govern them and enforce the rules and regulations of your community.

About one in six Americans live in an association-managed community, according to the Community Association Institute (CAI). An estimated 4 out of 5 residential buildings built since the late 1990s are governed by a homeowners' association.

However, as more Americans live in privately-owned communities, more lawsuits arise. Therefore, it is important to make sure the directors and officers of your board are protected against monetary damages incurred through lawsuits resulting from their actions as board members.

Directors' and officers' insurance (D & O) is a policy that protects your board members from such a situation, and we will discuss this topic in this month's newsletter.

Why Would Your Board be at Risk?

Board members all have one thing in common: they run the risk of being sued because they've assumed professional and fiduciary liability. Board of Directors

The board is a decision-making body that affects the economic and physical safety of shareholders and people that do business with the association. This means that the directors and officers face personal liability for their actions, and they are subject to certain rules when performing their given responsibilities. They must be prudent and perform their duties in a manner they believe to be in the best interest of the association; they are prohibited from using their position of power and trust to further private interests; and they are required to perform their duties in accordance with applicable laws and the terms of the organization's charter.

If a claim has been made against the board, the personal assets of any board member will be at stake if they do not possess D & O coverage.

Community members who serve on your board are performing an essential job for free. Why should anyone be able to sue them directly? This is why it is important to protect your board with the proper D & O coverage.

How to Protect Your Board

Directors' and officers' insurance covers against third party financial damages and other claims not covered under General Liability. The basic purpose of this policy is to protect directors and officers of your board from claims made due to allegedly wrongful acts or omissions made while acting in their individual or collective capacity on behalf of the association.

If a board does not carry the proper insurance, it will not be covered if it is necessary to defend themselves in legal proceedings. The defendants would have to dig into their own pockets to pay for legal expenses.

Check your policy to ensure that D & O coverage is included, or click here to email Amy O'Donnell, a Brownstone Program Underwriter who will be able to assist you with any questions you have.

You may also call (617) 236-6400 to speak with your Brownstone Insurance account representative directly.

For a minimal premium, you can rest assured that the personal assets of your board members will never be at risk due to their volunteering their time and effort for your association.

Don't Learn the Hard Way

A case that made headlines in New York city illustrates the importance of having D & O coverage.

Several years ago, a board member at a New York City co-op building announced that he had found a new insurance carrier that would save them money. The rest of the board members were pleased with this development, as the savings were important to them. However, when the officers of the board were recently sued for fraud by another shareholder, they found out that they were not covered for this type of claim. The case was eventually overturned, but the officers incurred tremendous legal costs that they must pay out-of-pocket.

In addition, they are now having a difficult time switching carriers because other companies are reluctant to do business with them, and board members fear that when they do find an alternate carrier, their rates will be sky high.

Don't let this happen to you!

Protect your board by adding D & O coverage to your Brownstone policy and ensure that their personal assets are never put at risk.

Sincerely,

Glenn Montgomery
Brownstone Insurance

In This Issue

Why Would Your Board be at Risk?

How to Protect Your Board

Don't Learn the Hard Way

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Possible scenarios in which directors and officers can be held liable:

· Continuing a wrongful practice after learning it is wrong

· Libel or slander

· Failing to pay HOA debts in a timely manner

· Improper management resulting in losses

· Receiving personal gain while performing as director or officer

· Making decisions based on inadequate information

· Ignorance of HOA books and records

· Not verifying content of official documents before signing

· Obedience to the governing documents

· Aiding and abetting illegal actions of others

· Conflict of interest

· Carelessness in conducting business or legal matters

· Failing to see what could be seen by merely looking

· Inducing intentional or careless wrongdoing

· Ignoring statutory or regulatory requirements

· Insufficient oversight of officers or employees

· Nondisclosure of questionable or unlawful actions

· Willful wrongdoing

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