Owners' Association

A liability claim can have major financial consequences both for the Owners' Association and for the individual board members. This is because board members are jointly and severally liable and, in the event of a claim, their private assets may be affected. The directors' and officers' liability insurance protects you as director of an Owners' Association if you are held liable for mistakes made during the performance of your duties. Even if you are claimed against your private assets. It does not matter whether you receive compensation for your work or not.

The insurance is intended for directors and supervisors both in office and resigned or yet to be appointed. In addition, the entire board is insured. The special directors' and officers' liability insurance VVE-polis is intended for:

• all managers and supervisors
• legal successors and spouses
• chairpersons of meetings of the Owners' Association who perform acts of administration for the Owners' Association
• persons who carry out acts of management but are not formally and statutorily appointed as directors
• external directors

• Owners' associations with negative equity
• Owners' Associations without a reserve fund in accordance with Article 5:126 (1) of the Civil Code (each Owners' Association must maintain a reserve fund to cover costs other than regular annual costs)
• Dormant" Owners' Associations where no administrator is appointed, no periodic maintenance and no meetings take place

Property Owners' Associations: to insure directors' liability or not?

In practice, a board member can be held liable for his or her private assets both from within and from outside the Owners' Association. Due to increased claim awareness and changing laws and regulations, administrators run an ever-increasing risk of being held liable by third parties, the Owners' Association or members of the Owners' Association. Here are a few examples:

Replacing roofing

At the meeting of the Owners' Association, it was decided to replace the roofing completely. The Owners' Association commissions the local roofer without investigating the financial position of the company. The Owners' Association transfers a large sum of money to the roofing company as a down payment. The roofing company goes bankrupt fairly quickly and the Owners' Association loses its down payment. The Association holds the board members liable for the financial loss.

It was decided to install an electric entrance gate so that the grounds of the residential complex would be properly secured. One of the members of the board of the Owners' Association hired a contractor to install the gate. The contractor incurs substantial costs and forgoes other assignments for this purpose. However, it turns out that there is not enough money in the coffers, which means that the Owners' Association cannot fulfil its contract. As a result, the contractor suffers considerable losses and the board members are sued in their private capacity.

In order to cover the risks of mistakes made by a director during the performance of his duties, you can take out directors' and officers' liability insurance for property owners' associations.

Read also:

Liability of directors