01/Feb/2008
Federation of Greater Baton Rouge Civic Associations:
How to Protect Your Neighborhood Organizations: Insurance Plans for Civic Association Members
By Wayne Woody
President of FGBRCA
In our last letter, I described some of the different possible neighborhood organizations. This time, I want to say a few words about the protection available to those residents that volunteer to serve as offices and on boards of Homeowner/Property owner organizations.*
The reality is not everyone is always happy with the decision made by others. An unhappy member of an organization may choose to challenge that decision by way of litigation. You may ask what the legal exposure of the officers or board members is.
This letter certainly should not be viewed as a legal opinion, but it can suggest a couple of factors that affect management of this type of risk in Louisiana.
Our state has provided a certain amount of protection to such associations, their officers and boards in its Revised Statutes, specifically Title 9, sec. 2792.7, paragraph A. It provides in pertinent part:
"A person who serves as a director, officer or trustee of the homeowners association and who is not compensated for such services on a salary basis shall not be individually liable for any act or omission resulting in damage or injury arising out of the exercise of his judgment in the formation and implementation of policy while acting as a director, officer, or trustee of that association, or arising out of the management of the affairs of that association, provided he was acting in good faith and within the scope of his official functions and duties, unless such damage or injury was caused by his willful or wanton misconduct."
Of course, anyone can sue notwithstanding this legal protection. It's up to the parties who are sued to have an attorney represent them in court and defend against the suit in order to prove that they qualify for this protection provided by the law. The association may provide these funds but most will prefer to seek the protection of insurance. This will not only pay the costs of litigation but also most, if not all of a judgment against the association, directors or officers because the court found that they didn't qualify under the law.
There are two common types of insurance policies that should be considered.
First, the D&O (Directors and Officers) policy, which protects the association, its directors, officers, and committee members for "wrongful acts" they may have committed.
Second, the CGL (Commercial General Liability) policy, which protects the association, its directors, officers, committee members, and sometimes the association's employees and association manager for bodily injury, property damage, personal injury and advertising injury.
All of these policies should be explained to your association by your insurance agent in order for your association to make an informed decision.
Finally, the beginning of wisdom in managing risk is to have legal counsel. Volunteers are not trained in many of the circumstances they are called upon to do or to decide. Prior legal advice will help prevent many mistakes.
* Defined in the LA Homeowners Association Act, R.S.9: sec. 1141.1 et seq.
Did you miss the last article from the President of the Federation of Greater Baton Rouge Civic Associations? Check it out by visiting the archives or going to our Decemeber 2007/January 2008 issue here!
How to Protect Your Neighborhood Organizations: Insurance Plans for Civic Association Members
By Wayne Woody
President of FGBRCA
In our last letter, I described some of the different possible neighborhood organizations. This time, I want to say a few words about the protection available to those residents that volunteer to serve as offices and on boards of Homeowner/Property owner organizations.*
The reality is not everyone is always happy with the decision made by others. An unhappy member of an organization may choose to challenge that decision by way of litigation. You may ask what the legal exposure of the officers or board members is.
This letter certainly should not be viewed as a legal opinion, but it can suggest a couple of factors that affect management of this type of risk in Louisiana.
Our state has provided a certain amount of protection to such associations, their officers and boards in its Revised Statutes, specifically Title 9, sec. 2792.7, paragraph A. It provides in pertinent part:
"A person who serves as a director, officer or trustee of the homeowners association and who is not compensated for such services on a salary basis shall not be individually liable for any act or omission resulting in damage or injury arising out of the exercise of his judgment in the formation and implementation of policy while acting as a director, officer, or trustee of that association, or arising out of the management of the affairs of that association, provided he was acting in good faith and within the scope of his official functions and duties, unless such damage or injury was caused by his willful or wanton misconduct."
Of course, anyone can sue notwithstanding this legal protection. It's up to the parties who are sued to have an attorney represent them in court and defend against the suit in order to prove that they qualify for this protection provided by the law. The association may provide these funds but most will prefer to seek the protection of insurance. This will not only pay the costs of litigation but also most, if not all of a judgment against the association, directors or officers because the court found that they didn't qualify under the law.
There are two common types of insurance policies that should be considered.
First, the D&O (Directors and Officers) policy, which protects the association, its directors, officers, and committee members for "wrongful acts" they may have committed.
Second, the CGL (Commercial General Liability) policy, which protects the association, its directors, officers, committee members, and sometimes the association's employees and association manager for bodily injury, property damage, personal injury and advertising injury.
All of these policies should be explained to your association by your insurance agent in order for your association to make an informed decision.
Finally, the beginning of wisdom in managing risk is to have legal counsel. Volunteers are not trained in many of the circumstances they are called upon to do or to decide. Prior legal advice will help prevent many mistakes.
* Defined in the LA Homeowners Association Act, R.S.9: sec. 1141.1 et seq.
Did you miss the last article from the President of the Federation of Greater Baton Rouge Civic Associations? Check it out by visiting the archives or going to our Decemeber 2007/January 2008 issue here!
