WHEN HOA OFFICERS AND DIRECTORS BECOME EXPOSED TO PERSONAL LIABILITY FOR THEIR ACTIONS

Volunteer officers and directors of homeowners and condominium owners’ associations are not generally personally liable to third parties, such as homeowners, for monetary damages that result from negligent acts or omissions in the performance of their duties. Because the services of such volunteers are critical to the management of the associations and such individuals generally serve without compensation, the risk of being subjected to personal liability for their actions as an officer or director would greatly discourage capable people from actively participating in the management of their association. Thus, to promote participation by association members as officers and directors of their association, state statutes and association governing documents typically provide for protections against personal liability in the performance of their duties. There is also a federal law known as the “Volunteer Protection Act of 1997” that provides limited protection against liability for the volunteer directors and officers of nonprofit organizations such as homeowners associations.

The protections provided by statutes and governing documents generally consists of “exculpatory” and “hold harmless” and “indemnity” provisions. An exculpatory clause consists of language that relieves a party from liability under certain conditions. Hold harmless and indemnity provisions shift the liability for negligent acts from the volunteer officers and directors to the association. In civil proceedings, officers and directors may be indemnified if they acted in good faith and in a manner that is reasonably believed to be in the best interests of the association.

Under the Volunteer Protection Act of 1997, directors are immunized from liability for an act or omission when: (i):