How Directors & Officers (D&O) Insurance Protects the Board
What is D&O Insurance?
Directors & Officers (D&O) insurance protects board members against personal liability for decisions made in good faith while managing the condominium corporation. Alberta law requires corporations to carry D&O insurance to protect board members from:
Legal claims from owners alleging mismanagement
Financial losses due to board decisions
Errors in enforcing bylaws or approving expenditures
D&O insurance does not cover fraud, intentional wrongdoing, or criminal acts by board members.
Example:
A unit owner sues the board, claiming negligent handling of a maintenance contract led to financial loss. If the board acted in good faith, D&O insurance would cover legal fees and damages.
The Role of Crime Coverage and Liability Insurance
Crime Coverage
Crime insurance protects the corporation against financial losses due to:
Fraud, embezzlement, and theft by board members, employees, or contractors
Forgery and unauthorized transactions
Cyber fraud and financial mismanagement
Example:
A condominium board treasurer embezzles reserve funds. Crime coverage ensures the corporation recovers the stolen funds without financial harm to unit owners.
Liability Insurance
Liability insurance covers third-party claims against the condominium corporation, including:
Injuries occurring in common areas (e.g., a slip-and-fall on icy walkways)
Property damage claims from contractors or visitors
Legal costs associated with defending claims
Coverage Gaps to Watch For
Inadequate limits may leave the corporation vulnerable to lawsuits exceeding policy limits.
Unit owner liability: Owners should carry personal liability insurance to cover damage to neighboring units.
Identifying Insurance Gaps and Financial Risks
Common Insurance Gaps in Condominium Corporations
Coverage Area | Common Issue |
Deductibles | Unit owners unaware of $50,000 chargeback liability |
Crime Insurance | No coverage for fraud or cyber theft |
Liability Coverage | Insufficient coverage for legal claims |
D&O Insurance | Limited coverage for board members |
Coverage Area | Potential Financial Risk |
Deductibles | Owners may refuse to pay, leading to legal disputes |
Crime Insurance | Stolen funds cannot be recovered |
Liability Coverage | Corporation may be forced to collect a special levy to pay for claims |
D&O Insurance | Personal assets of directors at risk |
