What is My Risk Exposure as a Condo Board Member?
If you've ever sat on the Board of Directors of a condominium or strata corporation, you know that the role can at times be frustrating, stressful, thankless, and time consuming. But it can also be rewarding, because it gives you an opportunity to directly enhance the value of your property and improve the quality of life in your community. But is there any liability risk involved in serving on the Board? And if so, what is the level of your exposure?
The Board of Directors is elected by the owners to act in good faith on behalf of all of them. Many states, provinces and territories have laws that protect directors and officers of a condominium or community association from liability if they acted:
- within the scope of their duties,
- in good faith, and
- in a manner that is not recklessly or grossly negligent.
Liability Protection for Board Members
The bylaws of the condo corporation may include an indemnity provision which holds harmless every director and officer against any liability and all costs and expenses arising in respect of the director's or officer's performance of his/her duties. However, that indemnity should not extend to a director or officer who was in breach of his/her duty to act in good faith.
Review your condominium / strata bylaws to make sure that any indemnity clauses cover both past and present Board members. If they do not, action should be taken to amend the bylaws.
If it hasn't already done so, the corporation should consider obtaining adequate director and officer liability insurance coverage, as a further measure of protection. Discuss the terms of the policy and coverage with the corporation's insurance agent. It's also a good idea to review the insurance and the risk of liability with the corporation's legal counsel.