If you not only live in a planned unit or common interest development (a PUD or CID) but also serve on the board of directors (the "board") of your homeowners' association (HOA), you are probably a dedicated and concerned citizen. Kudos to you for helping to keep your development a great place to live!
However, many homeowners have reservations about volunteering for the HOA's board. They're worried that serving as a board member might open them up to lawsuits. For example, since the HOA is responsible for maintaining the development's common areas, is an HOA board member personally liable for the cost of hospital bills and other damages if a homeowner slips, falls, and breaks a leg while walking on the swimming pool deck?
The answer is "not likely." Although board members are sometimes named in lawsuits against HOAs, board members are rarely found personally liable.
Because plaintiffs (or plaintiffs' lawyers) like to cover all the bases, when they sue an HOA for injuries, they sometimes name individual board members along with the HOA itself. This is a strategy often used for negotiation purposes, rather than being based on any real belief that a board member is personally liable for the problem. The reasoning is that the threat of personal liability will encourage a faster or more favorable settlement of the case.
Board members are, however, typically only personally liable for HOA matters if they breach a fiduciary duty to the HOA; in other words, if the plaintiff can show that the board member acted with negligence, willful misconduct, bad faith, or outside the board's authority. The court in such a case often determines early on that the plaintiff hasn't provided any such evidence, and dismisses the case against individual board members.
For more information on an HOA board member's fiduciary duty (and how to avoid breaching it), see Fiduciary Duties of HOA Board Members.
Example: An injured homeowner slips on a banana peel on the common swimming pool deck and breaks his leg. The homeowner then files a claim against the HOA and its board members asserting that his injuries were caused by the HOA failing to properly maintain the pool deck. If the court finds that the HOA knew of the problem, and ignored it, the HOA as a whole might be liable for damages. However, an individual board member will not be liable unless it's shown that the board member caused the poor maintenance of the pool deck by acting in a manner not consistent with the best interests of the HOA — for example, if the board member maliciously threw banana peels on the pool deck, or voted to limit clean-up on the deck surface because the board member was holding out to hire a family member's cleaning company.
If you are personally named in a lawsuit due to your actions on an HOA board, your HOA's Directors and Officers (D&O) insurance will likely protect you. A good D&O policy will reimburse you for any costs and expenses resulting from your action as a board member, including any costs of litigation. Check with your HOA to determine whether it carries D&O insurance and if so, what type of protection it offers.
Your HOA's general liability insurance might offer some protection as well. It's commonly meant to cover the HOA itself; but often includes some (minimal) protection for board members. It's worth checking the terms of the general liability insurance to find out whether it includes any personal liability coverage for board members.
You can get a copy of your HOA's insurance policies from the HOA, the development's manager, or the HOA's insurance agent's office.
If you are personally named in a lawsuit due to your actions as an HOA board member, the first thing to do is to contact your HOA's insurance agent. Send the company copies of the lawsuit. Give the responsible insurance agent the details on when you were served and when a response is required. Follow up if you don't hear back in a timely manner. You can also contact your HOA's attorney for assistance.
Your HOA's attorney might represent you in a personal capacity as well as representing the HOA itself. However, if your personal interests are not the same as the HOA's, you'll need your own attorney.
Typically, your insurance carrier determines whether you need personal representation. The insurance company evaluates the claim and assesses whether the HOA and the individual board members named have differing interests that could become irreconcilable. If so, your insurance company will recommend separate representation. Even if the insurance does not recommend a separate attorney, you can contact an experienced attorney in your area to discuss whether separate representation is warranted.
Unfortunately, if you need individual representation, your insurer might not cover the cost. This depends on whether the D&O policy covers separate counsel. The insurance agent can tell you whether separate representation is covered. If not, your HOA might be required to pay your legal costs. Many times a development's governing documents provide that if a board member is sued in connection with board duties, the HOA will indemnify (pay back) the board member for costs incurred (including attorney fees).
You and your attorney should review your HOA's bylaws and your development's covenants, conditions, restrictions (CC&Rs) and easements to find out the board member's rights to indemnification, and whether you will be reimbursed for the costs of your own attorney.
When it comes to personal liability for injuries on your development's common property, if you've been doing your job as a board member, you probably have little to worry about. Serving on your HOA board is a great way to contribute to your community. Don't let the minimal liability risks deter you from helping with this important job. But do make sure you check out what protection you have from personal liability under your HOA governing documents and insurance.