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Professional vs. General Liability for HOA Boards

It's that time of year - when many Boards and HOAs are planning for the calendar year ahead in their communities. Part of this planning includes the election of new Board members and discussions about General and Professional Liability insurance policies to protect this hard-working group of volunteers and the communities they serve.

Knowing the difference between General and Professional Liability Insurance is critical when establishing new Board members and planning for the upcoming year.

Your Association should already have General Liability insurance, which protects from issues like people getting injured on property (i.e. slips and falls) as well as other "common area" hazards that may present themselves.

Professional Liability Insurance (also known as "D&O" or "Directors and Officers" Insurance) is another very important, but separate, type of insurance that the board must secure.

Professional Liability insurance protects Board Members and Association management from possible recourse resulting from decisions made in their capacity as an association professional. Consider these examples:

  1. During a resident-attended HOA meeting, a Board member brings up the topic of a property owner at 123 Main Street not securing ARC approval before adding a chain link fence to protect their pit bull. That Board member then makes a comment about how this own never follows the rules, is always behind in paying dues, and is "basically a deadbeat". Word gets back to the owner who then sues the owner for slander and defamation of character.  

  2. It's time for a condo community to have new roofs put on each building. Three competitive bids were provided. Bids #1 and #3 were priced more competitively than bid #2, but the Board preferred Contractor 2 because they had a relationship with this company already, so they provided Contractor 2 copies of the other bids so that their preferred contractor could meet or exceed those prices. Contractor #1 found out his bid was shared for this purpose and sues the Association for unauthorized sharing of his work.

These scenarios, as well as countless other examples, or events where D&O insurance would likely come into play to defend the individual Board Members. It simply makes sense to ensure these individuals are covered from individual harms so they can feel free to do their jobs carefully, but freely as assigned.

If you have questions about Professional Liability Insurance or any other insurance-related matters tied to serving in a Board role, please feel free to contact us anytime. We are happy to clarify and help you determine which coverages make the most sense for your situation!

Kirk Ball, CIC is Principal Agent & Owner at Wren Insurance.