Three Quick Tips for Protecting Association Board Directors and Officers
Serving on an association board is an important job. Board directors and officers are just about always volunteers, who generously donate hours of their time in order to benefit their communities. They oversee important community needs, implementing policies as authorized by the association, and they approve the annual budget and much more. And as Board directors and officers, they deserve the thanks and support of the communities they serve.
Unfortunately, being a board director or officer also poses personal risk. That’s because even though your association carries general liability insurance, individual board members may not be fully protected from liability arising from claims brought by community members.
So, how can directors and officers protect themselves?
The obvious answer is for associations to purchase Directors and Officers insurance that covers individual board members’ actions. If your association does not have this specific type of insurance, you need to have a serious conversation with your insurance agent.
But are there steps board members can take to further ensure they never suffer the consequences of contentious litigation? …or to avoid being served with a complaint that forces you to file a claim on that Directors and Officers insurance policy?
WPM’s President of Association Management, Barry Yatovitz, asserts that the overarching rule that ought to guide and can protect every board member is the Business Judgement Rule.
“This Rule states that directors should always act in the best interest of the company, given all of the available information at the time. If a lawsuit were to come against a board member, a judge would determine if the board member acted as any reasonable person would have, given everything they knew at the time. If the answer is ‘yes,’ than the board member is protected,” says Yatovitz.
In addition to this primary guiding principle, Yatovitz offers three tips to help protect Board members, so that they can do their important work with a little more peace of mind.
Tip #1: Don’t Break the Law!
“This seems so obvious, but it can be tempting for board members to ‘bend’ the rules, if they believe it will save the association money. I don’t need to remind you that it is never ok to break the law! Failure to follow the rules renders an association and its directors vulnerable to any number of consequences, including civil lawsuits and criminal prosecution. Saving money today is not worth the risk in the long run.”
Tip #2: One for All and All for One!
“Always remember that as a board member, you have a fiduciary responsibility to decide matters for the benefit of all homeowners in your community. To that end, you should be very deliberate and be reasonable with all decisions. Perform your due diligence regarding each decision, so that if you are accused of preferring one member over another, you have documented the data that supports why you made the decisions that you did.”
Tip #3: Zip Your Lips!
“As a board member, you are entrusted with confidential information that must be protected. Do not share board information with other homeowners or talk about them outside of the board meetings. Be careful with protected documents, as well. Share electronic files using secure servers and maintain any hard files in locked areas.”
These simple tips don’t seem so difficult to follow – and they’re not. But they are frequently forgotten. If every board member follows them, your board will be that much closer to protecting itself, and your board members should be a lot more comfortable carrying out the essential services they provide to your community.Filed Under: Associations, Commercial, General