Home & Condo Owners Associations

Community Association Management Liability

Your personal assets may be at risk

As a director, officer, trustee or even a volunteer of a community association, you can be held personally liable for decisions and actions made on behalf of your association. Consider the following:

                    Directors, officers and trustees are usually not covered under general liability (GL) policies for their professional responsibilities

                    State immunity statutes may not provide adequate protection for directors, officers and trustees


Your association’s assets are at risk too

                    In most claims, the community association itself is named as a defendant

                    State immunity statutes often provide little if any protection for the association

                    Community associations are seeing an increase in the number of claims filed against them by community members as a result of decisions made by the board

                    Community associations are seeing an increase in the number of claims filed by employees for employment practices issues


Crye-Leike Insurance offers the protection you need

Community Association Management Liability insurance protects you as well as your association from damages (awards and settlements) and the defense costs resulting from wrongful act allegations and lawsuits.

We have insurance companies who offer a Community Association Management Liability insurance policy designed specifically for community associations, which offers some of the best enhancements available in the market today. These unique policies:

                    Protect directors, officers, trustees, employees, volunteers and committee members, as well as the community association, with a broad definition of claim

                    Has a duty to defend feature that provides legal defense for allegations of wrongful acts and covers associated defense costs

                    Provide claims-made coverage with reporting of claims as soon as practicable but no later than 60 days after the end of the policy period

                    Provide coverage for monetary and non-monetary claims

                    Cover punitive and exemplary damages where insurable under applicable law

                    Cover lawsuits and allegations involving wrongful termination, discrimination and general breach of fiduciary duty

                    Provide coverage for a community association management organization

                    Have optional coverage available for the builder/developer while acting as a member of the board


All insurance policies are not created equal

In many cases the coverage available under a property or general liability policy does not provide the broad coverage available under stand-alone management liability policies. These policies/endorsements generally:

                    Have additional exclusions not found in our policy

                    May not cover the community association itself

                    Do not provide a separate dedicated limit of liability for directors and officers (D&O) liability and employment practices liability

                    May not cover employment practices claims

                    Do not provide most of the enhancements required to fulfill the unique needs of community associations

                    May not cover wage and hour claims

                    Do not provide the benefit of a management liability claims specialist


Competing non-profit D&O policies may eliminate some of these concerns. However, most of them are not specifically designed for community associations and may not have all of the enhancements found in our companies’ policies.

Still think you don’t need Community Association Management Liability insurance?

                    No organization or person is immune from being the target of a wrongful act allegation or lawsuit. You need defense

                    Defense costs for such claims can be significant

                    Community associations have limited resources to indemnify directors and officers, or respond to expensive litigation, settlement or damage awards



Four major types of claims:

  1. Breach of contract

A breach of contract can occur when a binding agreement or bargained for exchange is not honored by one or more of the parties to the contract. In the community association context, this most frequently arises in contracts for improvement or repair of association property.

When an association receives a claim from a third party, a prompt response and good faith evaluation of the problem can pave the way for an early settlement of the dispute. If the third party's design or workmanship is deficient in any way, they should immediately be placed on notice. In this regard, it is advisable to keep photographic or video record of any potential problems.

Breach of contract example

The association has a contract with a service provider (e.g. landscaper) and believes the provider has not fulfilled their duties as defined in the contract. As such, the association wishes to terminate the contract and opts to not pay the landscaper for completed work. The association sends notice of termination to the landscaper, ending the relationship, and subsequently hires a replacement landscaper.

  1. Breach of fiduciary duty

The association’s board of directors must exercise a degree of care and loyalty required of a fiduciary officer or director of a corporation. Courts often apply a “reasonableness” standard in testing the validity of actions taken by the board in regards to association management.

Breach of fiduciary duty example

An association has delinquent owners and has requested counsel to foreclose on the unit for non-payment of assessments. The board president is an investor and wants to purchase the foreclosed units at the sale. The president requires information regarding the time and place of the sale so he can attend and bid.

He requests the information for his benefit and is not planning on advising any other board members or owners in the association of his intent to purchase. The association president purchases a unit at an association foreclosure. Another owner makes a claim against the board president for breach of fiduciary duty.

  1. Violations of CC&R’s

The covenants, conditions and restrictions (CC&R’s) are the governing documents that dictate how the homeowners association operates and what rules the owners — and their tenants and guests — must obey. These legal documents might also be called the bylaws, the master deed, the house rules or another name. These documents and rules are legally enforceable by the homeowners association, unless a specific provision conflicts with federal, state or local laws.

Violations example

An association has restrictions regarding color schemes of homes. An owner desires to build a home and paint it brown. The association approves the design and colors as they are in compliance with the CC&R’s because they are in harmony with other home colors in the subdivision.

A homeowner subsequently decides on painting the home pink, and they do so without notifying the association. The association advises the owner that the color was not approved; and the owners subsequently sue for arbitrary, discriminatory and capricious treatment in that they believe there are other colored homes in the neighborhood that are not on the approved color list.

  1. Employment practices liability

Coverage for defense costs and damages related to various employment-related claims, including allegations of wrongful termination, discrimination, workplace harassment and retaliation deriving from the employer-employee relationship.

Employment practices liability example

An association employs personnel to man the gate and security booth at the subdivision entrance. The association employs in excess of 20 employees and is therefore covered by the Age Discrimination in Employment Act [ADEA]. The association terminates a 72-year-old employee. All other gate personnel are considerably younger; and in response, the older security guard claims age discrimination.

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