What is D&O Insurance?

What is Directors' and Officers' (D&O) liability insurance?

From Founders Shield's website,"D&O insurance protects the company and its executives from certain claims made against them. Shareholders, competitors, investors, etc., can sue a company’s directors and officers, putting their personal assets at stake. Directors and officers (D&O) insurance protects these assets from lawsuits alleging leaders of wrongful acts managing the business."

Keyword: "certain"

From Wright Commercial Litigation's website, "Most D&O policies exclude coverage for acts of fraud, dishonesty, or intentional misrepresentation, often with a qualification that they are deliberate. However, rarely is it the case where the only claim in a suit is one based on fraud."

From that same website, "some states also prohibit insurance from covering “willful acts” and many do not allow a company to do so either"

and "Both criminal activity and fraud are misconduct excluded from a D&O policy based on the rationale that one should not encourage such bad conduct to occur by providing insurance if it does."

If an HOA's Board of Directors (or the majority of the Directors) supports an ongoing practice of failing to comply with By-Laws, is that a deceptive business practice, which could be as criminal activity?

Could the directors find themselves without insurance protection and facing the expense of hiring personal attorneys to represent them against allegations of willful non-compliance with By-Laws?

To what extent do directors of the Summit's HOA believe that D&O insurance will protect them in every case?

This is why each and every director of the HOA should be familiar with the By-Laws. When an action is proposed (or taken) by the Board that is not in compliance with the By-Laws, isn't a conscientious director obligated to object and go on the record with a "No" vote, just in case that action backfires on the Association?

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