[On-demand Webinar]: Protecting Your Board Members: Insurance Considerations in the Aftermath of the Champlain Towers Collapse

Every situation is different as each board and board member is exposed to different risks. There is not a one size fits all recommendation, which is why it is important to work with your risk management partner to conduct an analysis and review of your exposures, both personally and collectively as a Board of Directors.

HUB encourages third-party managers to seek legal counsel regarding the contracts and documentation needed to protect their company and exposure should a board of directors fail to take action on a directive or recommendation and a loss event occurs. Typically, a strong third-party property management agreement helps to mitigate exposure and transfer risk back to the property or homeowner association (HOA).

If the third-party management company employs individuals onsite at client properties (e.g., general manager of an HOA), it’s important that the HOA provide D&O coverage that extends to onsite employees and that the HOA’s policy is triggered in the event of an allegation or claim.

Lastly, document everything and continue to use good business judgement to limit potential allegations, such as gross negligence or willful misconduct.

Board members are protected from decisions and actions made by previous board members by the business judgement rule (inquire with your attorney to learn more) and by maintaining all documentation of previous decisions ― especially those that had financial implications to owners and their tenants. It is also important to discuss this matter with your risk management partner to ensure your D&O coverage extends to prior actions of past board members.

As of today, all of the factors that contributed to the tragic tower collapse are not yet known, and therefore it is difficult to predict specifics. However, HUB anticipates increased underwriter scrutiny, additional questions regarding the qualifications of board members and more requests for critical reports (e.g., structural engineering reports, fire and life/safety, etc.). We also expect property values to be assessed under the microscope to ensure that HOAs like Champlain Towers are adequately valued given current market conditions.

It depends on the individual’s exposure, tolerance for risk and the quality of the D&O coverage secured for the entity or organization. Typically, most board members leverage the D&O policy procured by their organization. Always ask for a copy of the policy prior to joining a board and have your legal and risk management teams review the policy and provide feedback.

Typically, yes. Depending on the allegation, the D&O policy serves as a “duty to defend” and therefore the board is covered against an allegation made by an owner or tenant.