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6 Tips to Avoid D&O Liability Claims


In today’s electronic world, informality is encouraged on Facebook, email communications, texting, etc.  But, when informality creeps into Board proceedings for Homeowners’ Associations (HOA), it can lead to major disputes and problems that result in liability claims.  Based on our experience, most of these claims could be avoided by following a few simple processes.  Here are six tips that can help you avoid D&O claims.

1. Engage professionals

• Attorneys specializing in Homeowners’ Associations (HOA) to review and update by-laws

• Experienced and credentialed property managers

• Accountant or CPA to review financials

2. Follow the meeting rules

• Board members should read and understand by-laws

• Ensure all association members receive and have access to the association’s by-laws

• Follow all meeting, voting and election procedures and rules

3. Keep by-laws current

• Conduct periodic review of governing documents

• Review law changes with 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

• Provide training to board members as a group

5. Avoid emotional involvement

• Avoid emotions and personality conflicts. These have led to some of the greatest wastes of time and resources

• Ensure procedures are followed and every association member is heard and treated fairly

6. Keep good records

• Keep well-documented board minutes so that there is no question about the discussion(s)

• Record communications with members, vendors, insurers, counsel, property managers, and anyone else

• Keep accurate financial records

• Keep complaint logs and records on responses

Communication is key to resolving problems. Addressing the problem quickly and efficiently can also be beneficial.  Thus, it’s 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 your Board avoid a claim.

No matter what preventative action is taken, claims will happen. Directors’ & officers’ policies are usually a claims made policy that requires that the association forward all claims as soon as reasonably possible.  When an association receives a demand, or learns information that could lead to a claim, the facts should be submitted to the association’s insurer immediately. The insurer is in the business of risk management and can assist in early resolution of claims or situations.

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Wise Property Solutions serves condominium and homeowners associations by addressing their financial, association and facilities management needs.  The only certified and licensed community association management firm serving the Mountain South (Virginia, North & South Carolina, Tennessee) with offices in the Tri-Cities and Knoxville.

 

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