Condo board members need to be well-insured


Dear Mr. Azrael:

I may become a board member of a condominium located in Owings Mills.

This condominium is a seven-building complex. Each building has 24 units. It is a new development. How much is recommended for a five-member board to be covered for liability insurance. Where can I get information on what is expected of board members' performance and duties?

Arnold Brooks Owings Mills

Dear Mr. Brooks:

The duties of board members should be spelled out in the bylaws of the condominium. Broadly speaking, the board has responsibility for the management of the condominium. The board establishes the annual budget, hires contractors, arranges for maintenance of common areas, enforces condominium rules and regulations and arranges for the collection of condominium dues and assessments. Often, the board will employ a professional management company that performs many of these functions.

In performing their duties, members of the condo board of directors must be careful to act within the scope of their prescribed duties. As long as they act in "good faith" and not in a reckless or grossly negligent manner, board members are insulated by law from personal liability for injuries to other persons or their property. But if the board exceeds its powers, as prescribed by the condominium declaration and bylaws, this exemption from liability may be lost.

For this reason, many condo boards and officers secure an insurance policy covering "directors' and officers' liability." These policies generally provide a defense and coverage if a director or officer is sued for personal injury, property damage and certain other claims arising out of the board's performance of its duties.

Before accepting a position as a condominium director, it would be wise to make sure the board is properly covered by insurance. You may wish to review the policy coverage and exclusions with the insurance agent or broker.

How much insurance is enough? This question is best directed to the insurance professional, but I believe $1 million is a minimum.

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