Watch out, not all liability insurance policies are created equal
By Tom Bacon
Do you sit on the committee of your owners’ corporation (OC)?
If you do, are you sure that you and your personal assets are adequately protected if the committee and the OC have proceedings filed against them?
The good news is that adequate and reasonably affordable insurance coverage is readily available. The bad news is that most OCs do not have adequate coverage.
The problem very often occurs because the directors and officers (D&O) liability coverage is not the focus of the OC’s insurance package. The reason it is often not the focus is that most brokers are not intimately familiar with the coverage, and to be honest, this is not a big-ticket item for most brokers. Although it is not the main generator of premium, it is a coverage that requires careful thought. In fact, the OC manager, who is usually delegated the responsibility to renew or obtain the insurance, should demand that the best available insurance coverage be presented.
The second problem is due to the fact that, most often, the main insurers of OCs are the direct insurers like the big, nationally-known insurance carriers (this is not to say that some of these carriers may not have a more comprehensive product available). These carriers may provide a great product from a property and general liability standpoint; however, they generally do not provide a comprehensive directors and officers liability product. Everyone assumes that they have full coverage. The reality is that “full coverage” and “appropriate coverage” are not the same thing.
There is no question that you get what you pay for in insurance.
In summary, if you cannot answer yes to virtually all of the following questions, your D&O coverage is probably not adequate:
Does the definition of insured extend beyond the actual committee members and office bearers?
Does the definition of insured protect past, present, and future members?
Does the definition of insured include employees (such as caretakers or building managers and cleaners if employed by the OC)?
Does the policy provide a defence to claims and proceedings (as opposed to just reimbursing for such costs)?
Does the policy cover defamation?
Does the policy defend claims seeking non-monetary loss?
Does the policy cover wrongful termination or other employer liability claims?
Does the policy cover discrimination?
Does the policy defend you where there is a claim or lawsuit for failure to maintain or obtain adequate insurance?
The potential claims against OCs and committees are only limited by the creativity of plaintiffs and their lawyers.
In these times when people have no qualms or concerns about suing their neighbours, let alone their own committee or building, the proper protection is worth its weight in gold.
My advice is that each committee should review their policy and ask your broker and the OC manager to obtain the maximum possible coverage, relative to the size of the building and the complexity of its issues (and occupants for that matter). It is better to be safe than to be sorry.