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Informality is constantly encouraged on Internet social media sites like Facebook, in electronic exchanges such as email communications and texting, but, when informality crosses over into board proceedings for a Homeowners’ Associations (HOA), it can lead to major disputes and problems that could result in liability claims. While there may be no real basis for most of these claims, they could also be completely avoided by following a few simple processes. Listed here are six tips that can help to avoid directors and officers (D&O) liability claims. 1.Engage professionals Have an attorney who specializes in Homeowners’ Associations (HOA) review and update by-laws. Make sure that the board hires only experienced and credentialed property managers and have an accountant or CPA review financials. 2.Follow the meeting rules Board members should read and understand by-laws and ensure that all association members receive and have access to the association’s by-laws. It should be agreed that everyone follow all meeting, voting and election procedures and rules. 3.Keep by-laws current Conduct periodic review of governing documents as well as review law changes with an attorney to understand the impact to the association. Make sure the changes are memorialized and the bylaws are properly amended. 4.Elect responsible board members Make sure prospective board members know what their position entails. Require all board members to read the by-laws before taking office. 5.Avoid emotional involvement Avoid emotions and personality conflicts. Ensure procedures are followed and every association member is heard and fairly treated. 6.Keep good records Keep well-documented board minutes so that there is no question about the discussion(s), and record communications with members, vendors, insurers, counsel, and property managers. Keep accurate financial records as well as complaint logs and records on responses. Communication is key to resolving problems. Addressing the problem quickly and efficiently can also be beneficial. Remember, it’s a good idea for the association to have a mechanism in place for the community association to address conflicts and grievances. An alternative dispute resolution may help the board avoid a claim. No matter what preventative action is taken, claims may still occur. Directors & officers liability policies are usually a claims made policy that requires that the association forward all claims as soon as reasonably possible. When a company receives a demand, or learns about information that could lead to a claim, the facts should be submitted to the association’s insurer as soon as possible.
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