The heart of community association governance lies in the network of interactions, responsibilities, and relationships that shape board members’ decisions—many of which can create liability risk. Because these everyday activities can lead to potential legal exposure, Directors & Officers (D&O) insurance is one of the most important protections a board can carry.

D&O liability insurance safeguards directors and officers from claims arising out of their professional duties. Though not required by law, D&O coverage is strongly recommended for condominium and cooperative boards because decisions made on behalf of owners—things like approving renovations, enforcing bylaws, handling complaints, or hiring vendors—can sometimes lead to allegations of breach of contract, breach of habitability, or breach of fiduciary duty. Even when a claim lacks merit, the cost of defending it can be substantial. If a board doesn’t carry D&O coverage, board members may have to pay that cost out of pocket.

Understanding the landscape in which boards operate makes the importance of D&O even clearer. A significant majority of board-related lawsuits occur in states like New York, New Jersey, Florida, Texas, and California, where community associations are highly active and often confront complex governance issues. In New York City alone, most associations have experienced, or are at least aware of, situations that could lead to a claim against the board. Because lawsuits must be defended regardless of merit, and because many involve non-monetary actions such as injunctive relief or declaratory judgment, legal costs can escalate quickly and unexpectedly. Without proper D&O coverage, board members’ personal assets can be at risk.

When it comes to D&O, a policy’s quality matters just as much as its presence. Stand-alone D&O policies typically offer broader and more reliable protection than endorsements tucked into a building’s package policies. It’s also essential that management firms be properly insured under their contracts, as their agreements often contain indemnification provisions that can pull the board into disputes involving managerial actions.

Ultimately, ‘board relationships’ are the everyday interactions boards have with owners, managers, contractors, and one another—interactions that can quickly evolve into claims. With strong Directors & Officers coverage, timely reporting, and clear contractual protections, boards can navigate those relationships confidently, while still safeguarding both their community and themselves.