What board member wants to be involved in a lawsuit? None, which is why having the right Directors & Officers policy is so important. The Directors & Officers policy provides coverage for the board members, committee members, volunteers, property managers and the association from suits arising out of breach of fiduciary duty, breach of contract, discrimination, harassment, negligence, wrongful foreclosure and misuse of funds.

When there is a suit that the insurer wants to settle, and the board does not consent, the association may be responsible for any loss sustained over the proposed settlement amount including defense costs.

  • The Soft Hammer Clause would be where the insurer and the association share in the settlement over the proposed settlement with the insurer paying the larger percentage and the association paying the smaller percentage.
  • The Hard Hammer Clause is the reverse, with the association paying the larger percentage and the insurer paying the smaller percentage. Common Hammer Clause percentages are 80%/20% and 75%/25%. The percentages vary by insurer.

Serving on an association board is a difficult job in itself. Having the right Directors & Officers Liability policy to protect yourself is of utmost importance.

If you have any questions on Condo Association coverage, be sure to contact Park & Associates.

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