Condo Media - May 2013 - 52

by Nena Groskind

GOVERNANCE

The Liability Landscape
Community Association Trustees Don’t Have to Worry (Much) About Personal Liability

C

ondominium owners ask many
questions before volunteering
to serve on their community
association’s governing board:
“How much time will it require?”
“How many meetings must I attend?”
“How much do I have to know
about finance?” “How much
abuse from other owners
will I have to endure?”
And then there is this
question: “Will I be personally liable for decisions
I make or actions I take
as a board member?”
Few trustees, if any,
ask this question, but
they should — not because the risks are large
(they are actually quite
limited), but because
they are real.
The liability landscape for
trustees is like a football field
with a live hand grenade buried somewhere between the goal
posts. The odds of stepping on it
are small, but it’s best to know where
the device is buried and, even better,
that it has been disarmed, before anyone
starts racing up and down the field.
Trustees are pretty well protected
against personal liability claims. Their
protection comes from three sources:
• The association’s governing documents
• Directors and Officers (D&O) insurance
• Legal precedents

The Documents

It is often said and generally well
understood that in today’s litigious
52

Condo Media • May 2013

society, anyone can be sued for anything. That rule certainly applies in
community associations, where boards
are frequently the targets of suits filed
by owners for a variety of reasons and

sometimes for no discernible reasons at
all. The governing documents typically
contain language indemnifying board
members or “holding them harmless,”
should they be named individually, as is
often the case, in suits filed against the
board. As long as the trustees’ actions
are not “willful, criminal, or reckless,”
Henry Goodman, a partner in Goodman, Shapiro & Lombardi, LLC,
explains, the association agrees to cover
any defense costs they incur as well as
any personal judgments against them.
“If trustees are acting within the
indemnification rights they have,”

Sandy Moskowitz, a shareholder in
the Boston law firm Davis, Malm &
D’Agostine, P.C., notes, “they should
be OK.”

D&O Insurance

Indemnification is an essential
guarantee for trustees, but it
is an empty promise if the
association lacks the funds
to make good on it.
“That’s where D&O insurance comes in,” Joel
Meskin, vice president
in charge of community association products
for McGowan & Company Inc., observes.
“If you’re named in a
$250,000 defamation
suit and the association
only has $150,000 in
its kitty, the indemnification isn’t going to
help you much,” he says.
While suits against trustees
rarely produce judgments against
them, he points out, those suits have
to be defended, nonetheless, and D&O
insurance will cover the costs.
“If you or I were sued by some crazy
individual and had to go out and hire
a good law firm for defense, we’d run
out of money pretty quickly,” Meskin
says. D&O insurance will cover defense
costs. And since these suits rarely
produce judgments against the trustees, Meskin notes, “that provides 95
percent of the protection they need.”
The old American Express slogan —
“don’t leave home without it” — comes
to mind. Serving on an association
board without it “is like walking around
with your wallet hanging outside of
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