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D&O Insurance | Older Condo Insurance | Association Reserves - YouTube
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(soft music)
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- Well, hello and welcome
to our "Bonus Content,"
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following up to our older condos webinar.
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My name is Robert Nordlund.
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What we're finding is that
program was very popular,
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and we scheduled some extra
time with our panelists
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to address all the
questions that you asked.
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So today we're here with Kevin Davis,
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Kevin's President of Kevin
Davis Insurance Services,
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largest provider of
specialty insurance coverage
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for community associations
in the United States.
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Kevin's here to answer a number
of the most common insurance
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questions you asked in that webinar.
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So Kevin, it's good to have
you with us here today.
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- Sure. Thanks a lot.
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I'm glad to be invited back.
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I have also gotten a lot of questions
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about what type of
insurance coverages we need?
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What happened?
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How can we make things better
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dealing with deferred maintenance?
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And I think it's a great opportunity
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to kinda deal with some
of these insurance issues.
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And I hope we get the chance
to answer all those questions
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that we been asked.
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- Fascinating. Okay.
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Well, in that webinar about
Champlain Tower South,
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you spoke about all these
different insurance coverages,
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the different types of
insurance coverages.
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And that's where I'd like to start,
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talking about liability,
excess insurance, D&O, H06.
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It's clear the audience was
craving more of your time.
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So could you start with some of that?
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Like, what is D&O insurance and who needs?
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- Sure.
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Out of all the coverages
were talking about here,
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the D&O is probably the most important.
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D&O is directors and
officers liability insurance.
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This is a coverage you have
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when you were named in a lawsuit.
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When somebody wants to sue you,
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'cause you breach of fiduciary duty
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or you're acting inappropriately,
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or they're saying that you
just something that you weren't
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entitled to doing,
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you didn't have the authority to do.
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So it is really as board of directors,
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it's really important
to make sure you have
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a directors and officers
liability insurance policy.
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- Okay. You talked
about having the policy.
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What types of things
does it actually cover?
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- Sure.
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- It's not the fire and
flood types of things,
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but it's more of those
actions that you spoke about?
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- Exactly.
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When you talk about a
director and officers policy,
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you're talking a wrongful act policy.
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- Okay.
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- With general liability policy,
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you're talking about a property
damage or bodily injury.
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Some may slip and fall, or
a tree falls, and something.
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But a D&O is a wrongful act.
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A wrongful act is any
act that were mentioned,
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which says, any act itself,
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board is held legally responsible for,
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or not legally responsible,
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they're being sued or a
claim is made against them
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because they didn't have the
authority to tow my car away.
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They didn't have the authority to tell me
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I can't put signs out.
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They don't have authority to tell me
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I had to park a certain place.
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So who are the board members to tell me?
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Even though the documents
outlining our rules are,
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there are people who live
in these associations
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that says, "I'd never read the documents.
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I don't agree with your documents.
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I think your documents are
unenforceable or unreasonable,
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and I'ma challenge the
board's authority to...
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And the perfect example
right now is COVID.
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Once the board of directors
started closing pools
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and closing gyms,
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where did they get the
authority to do that?
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And that was the question.
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And so we start seeing lawsuit claims
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against the board of directors
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'cause they didn't have the
authority by the government
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documents that say, "you
can't do these things."
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So what happens, your
director and officer liability
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comes into play and responds
to these types of claims.
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- Okay. You're talking about
the decisions they make.
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How does that affect
the decisions they make
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or fail to make about
maintaining the property?
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Talk about maintenance related decisions.
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- And that's the important
thing about what happened
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in Surfside, Florida.
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Because there's one exclusion
that's really, really critical
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in a directors and
officers liability policy,
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and that is the property damage exclusion,
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the bodily injury exclusion.
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So if the board is sued
because of some damage
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to the property,
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like what happened, the
whole building went down.
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That's no longer a D&O,
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it's now a general liability policy,
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that's general liability claim
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because general liability
covers property damage.
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However, here's the issue,
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is that they had deferred
maintenance problems
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for years and years and years.
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So if you sue the board and said,
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"board, listen, you did deferred,
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you did not manage the
property well, okay?
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You didn't fund the reserve.
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So now we're gonna sue
the board of directors
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because they didn't do
their job properly."
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Now you have to-
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- That wrongful act that
you were talking about.
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- Exactly.
- Okay.
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- 'Cause a wrongful act,
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which allows coverage to
be, may have or may not,
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but then they have bodily injury part
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or property damage part
in that comes into play,
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which could be excluded from coverage.
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So if you go back Champlain Towers, okay?
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The building came down,
people were killed,
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what happens is those two things
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can automatically exclude coverage
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under the director and
officer liability policy.
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'Cause once you talk about bodily injury
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and property damage,
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all of a sudden, now it is
a general liability claim
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and not a D&O claim.
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Even though it is a wrongful act,
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the board did something wrong,
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they failed to maintain it
properly, any kind of way.
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- Yeah. There's a hard line
there, a specific exclusion.
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- There's a hard line,
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because again, a D&O is
a wrongful act policy.
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That means anytime they do anything wrong
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and they're sued as a result of that,
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the D&O policies should respond.
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So the key thing in it
when looking at D&O policy
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is what is not covered.
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Because right now
everything's a wrongful act.
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No matter what they do,
you could be wrongful act
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by not funding reserve,
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or allowing the building to collapse
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with not not repairing the balcony,
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not repairing the pool.
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So when you start talking
about certain items,
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we say, "okay, here's the line."
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So if it's number one,
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if the building collapses,
or if property damaged there,
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or somebody gets hurt, that's
general liability itself.
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There's certain things that's uninsurable.
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So now if we say, if you
commit a grossly negligent act,
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something that is defies
or a criminalized, okay.
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- If you had a board member
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punching a (indistinct).
- Exactly. Yup.
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Exact certain things are
not covered by D&O coverage.
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However, you may still be
defended until the judge says,
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"yes, you did something wrong."
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- Got it, got it. Okay.
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- So it's not that we as an insurer,
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we're not gonna say,
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"you did something wrong and
therefore is excluded," okay?
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Under certain exclusions,
but we will be able to say,
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"guess what?
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You'll be defended and
let the judge determine
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if you did something that
was correct or incorrect."
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- Got it. I like that.
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- Not dishonest, yes.
- Okay.
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You talked about board
members having D&O insurance.
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Do managers need D&O insurance?
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And should the management
company be insured
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by the association's policy
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when they're doing work
for the association?
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- Okay.
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Now, most management companies
have their own E&O policy,
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errors and omissions policy,
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because they have a professional
standard that they have.
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So they do things on a professional level,
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give advice to the board of directors.
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They may set budgets.
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They may help out with reserves.
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So they have certain advice that they give
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in E&O coverage.
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However, because they are
agents of the board of directors
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and acting at different direction,
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some D&O policy will pick up coverage
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for that property manager.
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I would say, the one thing
that if you're listening
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and you're on a board,
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find out if your policy you
have for directors and officers
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cover the property manager,
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because if they are named in a lawsuit,
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the likelihood you have an agreement
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to reimburse them any.
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'Cause most management companies have,
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you acted out of direction,
you reimburse us.
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So you should make sure
that management company
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is covered under your director
and officer liability policy.
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It's really critical.
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- Excellent. Okay.
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Well, thank you very much.
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That's a tremendous insights
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about all the D&O type of policy questions
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that we were hearing.
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- Thanks a lot.
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