HOAs Should Have Both “Directors & Officers” Insurance and “Crime/Fidelity” Insurance

Notwithstanding the fact that state statutes and homeowners’ association governing documents contain specific provisions regarding insurance coverage that is necessary, it is not uncommon for homeowners’ associations to be operating without the necessary and required coverage. HOA board members are not typically insurance experts, and in most instances individual board members do not know exactly what insurance coverage their association needs to have.

One of the types of insurance that is often overlooked by homeowners’ associations is crime and fidelity insurance, which is a type of insurance coverage that is separate and distinct from directors and officers (“D&O”) insurance. D&O insurance protects directors and officers from personal liability for decisions they make while on the board and is in addition to the association’s general liability policy. D&O insurance covers such things as board negligence and breach of fiduciary duties, provided the errors or omissions were: (i) within the scope of the officer or directors’ duties; (ii) performed in good faith; and (iii) not willful, wanton, or grossly negligent.

Crime and fidelity insurance covers: