TL;DR
For HOA and condo boards
A treasurer or president who signs off on the master policy is making a fiduciary decision on behalf of every owner in the community. Here is what that decision actually involves.
Board members are volunteers in most communities, and it is easy to treat the annual master-policy renewal as an administrative task the managing agent or the outgoing board handled last year. It is not. Most governing documents and state common-interest-community statutes place an affirmative duty on the board to maintain adequate insurance on the common elements and association property, and that duty follows the same standard as any other board decision: it has to be informed, made in good faith, and reasonable under the circumstances.
The business judgment rule is the legal doctrine that generally protects board members from personal liability for decisions that meet that standard, even when the decision turns out badly in hindsight. What it does not protect is a decision that was never actually made, renewing the same policy year after year without reviewing replacement cost, the valuation basis, or the deductible is a much harder decision to defend than one the board documented as a deliberate comparison of options.
Directors and officers (D&O) coverage is frequently confused with the master property policy, but the two protect different things entirely. The master policy insures the building and common elements against physical loss. D&O insures the individual board members against claims that their decisions, not a physical hazard, caused harm: an allegation of favoritism in vendor selection, mismanagement of reserve funds, wrongful expulsion of an owner from a common facility, or a breach of the fiduciary duties described above. Without D&O, a board member sued over a governance decision could be personally exposed to legal defense costs even if the claim is ultimately meritless.
One detail worth understanding early: D&O policies are almost always written on a claims-made basis, which means the policy in force when a claim is reported, not when the underlying act occurred, is generally the one that responds. That distinction matters most at moments of transition, when board turnover changes who is making decisions and which policy period a later claim might fall into.
A board member does not need to become an insurance professional, but reading the declarations page with a checklist changes what the board can defend later. Confirm the valuation basis (bare-walls, single-entity, or all-in) matches what the recorded declaration specifies. Confirm the property limit is based on current replacement cost, not a figure carried forward from a prior renewal. Note the deductible in dollars, since that number is what gets passed back to owners as a special assessment after a shared-cause loss. Check that the association, not just the managing agent, is named correctly as an insured. And confirm the D&O limit was chosen deliberately rather than defaulted to whatever the prior renewal carried.
Common questions
The business judgment rule generally protects a board's good-faith, informed decisions from personal second-guessing, including decisions about coverage limits and deductibles. The protection depends on the decision being informed and reasonable, a board that never reviewed replacement cost figures or simply renewed without comparison is on weaker footing than one that documented an actual review.
Usually not directly. A slip-and-fall is a bodily injury claim that typically falls to the association's general liability coverage. D&O responds to claims alleging that a board member's decisions or oversight, not a physical hazard, caused financial harm, for example an allegation of mismanaging reserves or breaching a fiduciary duty.
There is no single figure that fits every association; size, unit count, reserve balances, and litigation history in the state all factor in. The more useful exercise is asking whether the current limit was set deliberately at the last renewal or simply carried over, and whether it has kept pace with the association's growth.
Free coverage review
Send your declarations page and current D&O policy, and we will tell you where the coverage matches the risk and where it does not.