How do we buy directors and officers insurance for our HOA board, and what should the policy cover?

By OurHOA · General information · Revised November 7, 2026

How an HOA board buys D&O insurance: what general liability misses, what TX, FL and CO volunteer immunity laws leave open, and the policy terms to check before you sign.

Part of the HOA board handbook: vendors, projects and upkeep.

The short answer

Buy a stand-alone directors and officers policy written for community associations, and read it before the board votes. The general liability policy pays when someone slips on the pool deck. It does not pay when an owner sues the board over a denied fence, a fine, an election or a records request, because those claims are about decisions, not injuries. A D&O policy is the one that pays a lawyer to defend those decisions. State volunteer immunity laws in Texas, Florida and Colorado help a director who did the job honestly, but none of them stops an owner from filing suit, and none of them pays defense costs or protects the association itself. Insurance does. Rules vary by state and by your declaration and bylaws, so treat this guide as education, not legal advice, and have the association's attorney or broker answer questions about a specific claim.

What the volunteer immunity laws do and do not cover

Texas. Civil Practice and Remedies Code chapter 84 counts a homeowners association described in Internal Revenue Code section 528(c) as a charitable organization, and section 84.003 counts an unpaid director or officer as a volunteer. Under section 84.004(a), that volunteer is immune from civil liability for an act or omission resulting in death, damage or injury while acting within the scope of the volunteer's duties. Section 84.004(d) keeps liability for the operation of motor-driven equipment, and section 84.007(a) removes the protection for conduct that is intentional, wilfully negligent, or done with conscious indifference or reckless disregard for the safety of others. Florida. Section 617.0834 says a director or officer of a not-for-profit corporation is not personally liable for monetary damages for a statement, vote, decision or failure to act unless the person breached a duty and the breach involved a crime, an improper personal benefit, conscious disregard of the corporation's interests, or recklessness or bad faith toward others. Colorado. C.R.S. 38-33.3-303(2)(b) says board members and officers not appointed by the declarant are not liable for actions taken or omissions made in performing their duties, except for wanton and willful acts or omissions. C.R.S. 13-21-115.7 adds immunity for unpaid directors of nonprofit organizations, but only for those exempt under section 501(a) and listed in section 501(c). An association that files Form 1120-H is not listed there, so don't count on that second statute without asking your CPA how the association files. Read those three laws closely and the gaps show. Florida's protects against monetary damages, so an owner can still ask a court to order the board to act. All three protect individuals, not the association. And every one of them is a defense raised after the suit is filed, which means someone still pays a lawyer to raise it.

What a D&O policy pays for, and what it leaves out

The Washington Secretary of State's nonprofit handbook describes three parts of a typical D&O policy: coverage for directors and officers when the corporation does not indemnify them, reimbursement to the corporation when it does, and coverage for claims against the corporation itself. It also lists the usual exclusions: dishonest, fraudulent or criminal acts; fines, penalties and punitive damages; bodily injury and property damage; personal profit a director was not entitled to; employment claims; claims the corporation brings against its own directors; and losses covered by other insurance. Two items on that list matter most to a small HOA. Bodily injury is excluded because the general liability policy is supposed to pick it up, so keep both policies in force. Theft by a treasurer is excluded as a dishonest act, so the association needs separate crime or fidelity coverage. Colorado requires it once an association has 30 or more units and someone controls or disburses its funds: C.R.S. 38-33.3-313(10) sets the minimum at two months of current assessments plus reserves. The handbook also notes that most exclusions other than intentional conduct can be changed by negotiation or extra premium. Ask.

Questions to put to the broker in writing

Send these to the agent before you ask for quotes, and ask for the answers on the quote itself or in an email you can file with the board records. 1. Who is an insured? You want the association, current and former directors and officers, committee members, other volunteers acting for the board, and any manager or bookkeeper acting on the board's behalf. 2. What counts as a claim? Ask whether it includes a written demand letter, a request for non-monetary relief such as an order to approve an architectural request, and an administrative complaint such as a fair housing complaint filed with a government agency. 3. Is defense paid inside or outside the limit? The Washington handbook warns that defense costs are often charged against the limit, which shrinks what is left for a settlement or judgment. 4. Does the insurer have a duty to defend, or does it reimburse the association after the fact? Who picks defense counsel? 5. What is the retention, the amount the association pays before coverage starts, and does it apply per claim? 6. Is there an exclusion for claims arising from contracts, construction defects, or failing to buy or keep other insurance? Ask the agent to quote with and without each one. 7. What is the retroactive date, and will a new carrier honor the current one? 8. If the association merges, dissolves or hands control back to a declarant, what does an extended reporting period cost?

Claims-made timing: the trap that loses coverage

D&O policies are generally claims-made. The Washington handbook puts it plainly: a claim must be both made and reported during the policy period for coverage to apply. That has three practical results for a board. First, report early. When an owner's lawyer sends a demand letter, or an owner says in a meeting that they are going to sue, send written notice to the broker that week. Ask whether the policy lets you give notice of circumstances that may become a claim. Where it does, that notice can tie a later lawsuit to the current policy. Second, don't let the policy lapse, even for a month. A claim made during a gap has no policy to land in. Third, protect the retroactive date when you switch carriers. If the new policy only covers decisions made after its start date, last year's fine or election is uninsured. Ask the new carrier to match the old retroactive date, often called full prior acts coverage, and get it in writing before you cancel the old policy.

A timeline and a motion the board can use

- 90 days before renewal: the treasurer pulls the current policy, the declarations page, the claims history and the bylaw indemnification article. The secretary checks whether the declaration requires D&O coverage or a minimum limit. - 75 days: send the broker the written questions above and ask for two limit options, such as $1 million and $2 million, with the retention for each. - 45 days: quotes due. Put them in a one-page table: limit, retention, defense inside or outside, retroactive date, insured persons, and every exclusion. - 30 days: the board votes at an open meeting. - Renewal day: confirm the binder, save the full policy with endorsements in the association's records, and calendar the next renewal. A motion the secretary can record: "Motion to bind directors and officers liability coverage through [carrier] with a limit of $[amount] per claim and in aggregate, a retention of $[amount], and a retroactive date of [date], for the policy period [start] to [end], at an annual premium of $[amount], as presented in the quote dated [date]." Our guide on reading an HOA insurance renewal quote covers the rest of the package, and our guide on what to do when an HOA is served with a lawsuit covers the first week after a claim arrives.

Mistakes boards make with D&O coverage

Assuming the general liability policy covers board decisions. Read the insuring agreement. If it says bodily injury and property damage, it does not cover a fair housing complaint. Buying the cheapest quote without reading the exclusions. A low premium that excludes contract disputes or non-monetary claims may not respond when an owner sues to force the board to approve a request. Leaving committee members off the policy. The architectural committee makes many of the decisions owners fight about. Confirm the definition of insured includes them. Talking settlement before the insurer agrees. The Washington handbook notes that policies generally require the insurer's consent before you accept a settlement offer. Settle on your own and you may pay on your own. Waiting to report. A director who keeps a demand letter in a drawer until the lawsuit arrives can turn a covered claim into an uncovered one. Losing the policy. A new board cannot report a claim against a policy nobody can find. Keep the full policy, every endorsement, and the broker's contact information in the association's records, not in a director's personal email.

Sources

These guides are general education for HOA boards and residents, not legal, tax, or financial advice. Rules vary by state and by your community's governing documents - check with a professional for your situation.

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