Fiduciary duty can be summarized in three parts:

• Duty of Care: Make decisions with diligence and sound judgment.
• Duty of Loyalty: Avoid conflicts of interest and act in good faith.
• Duty to Act Within Authority: Follow governing documents and laws.

In short, it’s the board’s obligation to lead responsibly and protect all owners.

Insurance plays a major role in fulfilling fiduciary obligations. If coverage is inadequate or improperly managed, both the association and its board members may face serious consequences, including personal liability for failure to procure proper insurance.

Last month, you learned how accurate property replacement values impact recovery after a loss,  and how underinsurance can lead to costly assessments or lawsuits.

Now, you also know that board members can be held accountable for mistakes and oversights, which is why Directors & Officers (D&O) Insurance is so important. D&O coverage is designed to protect against claims of mismanagement, negligence, or breach of fiduciary duty.

If you serve on a board, it’s important to confirm that your association’s D&O insurance policy includes defense cost coverage and the right endorsements to protect the association, its board members, and the management company from potential exposures.

There are three key D&O protections you should confirm are in place:

1. State nonprofit statute protections for volunteer leaders.
2. Indemnification through your governing documents.
3. Failure to procure coverage, designed to pay the defense costs.

If any one of these elements is missing, you could face uncovered claims and personal financial exposure.

Key Takeaways for Boards and Community Managers

• Review coverage annually. Review the association’s property insurance with a knowledgeable agent to ensure policy terms and coverage limits are adequate. Consider getting competitive quotes regularly to ensure you’re getting the best package possible.
• Act with fiscal responsibility. Make informed, forward-thinking decisions that protect the association’s financial stability.
• Stay objective. Serve the entire community fairly and without bias.
• Confirm D&O Insurance coverage. Ensure your D&O policy includes defense cost coverage and aligns with your association’s exposures to safeguard the board and management team from personal liability.

The Bottom Line

Serving on a board is a privilege and a serious responsibility. Understanding and honoring your fiduciary duty and ensuring proper insurance safeguards not only protects you but also your entire community.

Work with your insurance advisor, attorney, and management company to confirm you have the right coverage and make decisions that reflect your association’s best interests.

This article does not contain any legal advice, and it’s highly recommended that every Board consult with an Attorney about their Fiduciary Duty and the legal risks involved.

Fiduciary Duty and Insurance Responsibility: 
What It Means for Your Association’s Property Coverage 

Why Fiduciary Duty Matters for Every Condo and Townhome Association

When serving on a Board of Directors, one of the most important and often misunderstood responsibilities is your fiduciary duty. In simple terms, this means always acting in the best interest of the association, using good judgment, care, and integrity. 

Every board member is expected to make informed, ethical decisions that protect the community. Decisions should not be based on personal interests or agendas.