Insurance for Co-op Board Directors & Officers
Can anyone provide some thoughts with respect to insurance to protect the personal liability of directors and officers of small (particularly self-managed) co-op boards from potential litigation? Specifically: 1) Is it typical for co-op board directors and officers to be insured? 2) How do co-ops obtain such insurance? 3) Approximately how much should the insurance…
Can anyone provide some thoughts with respect to insurance to protect the personal liability of directors and officers of small (particularly self-managed) co-op boards from potential litigation? Specifically:
1) Is it typical for co-op board directors and officers to be insured?
2) How do co-ops obtain such insurance?
3) Approximately how much should the insurance cost for a small co-op on an annual basis?
As additional information, the co-op is a taxable corporation and not a non-profit.
Any thoughts would be greatly appreciated.
Thank you very much to everyone who provided their thoughts above. It is greatly appreciated.
When I hear “small,” I was thinking typical 3 and 4 unit brownstone coops, where everybody is on the board. Most of these don’t have it, but they are still (willingly or ignorantly) at risk.
Once I bought into such a coop and learned the risk I had undertaken, I convinced the coop to get D&O. I also would never serve on a board again without it – and that includes a board of a non-profit – many who join those boards aren’t aware that they need to be properly insured.
Coming from a small coop (15 units) with a lot of litigation, I would never serve on a coop board without D&O insurance. Our coop had 1 very litigious member who wreaked havoc and we were very thankful that we had D&O insurance. If you serve on a board and you are sued, for any reason, you are personally liable without insurance. Even if it is a nuisance suit, you still need to pay for an attorney to defend you and D&O is absolutely necessary. We also used Mackoul and would recommend them.
I don’t think it is very common in small, self-managed coops, which tend to run on shoe-string budgets (and don’t always make the smartest decisions as a result). But that doesn’t mean you don’t run some really big risks by not having it.
There are two kinds – cheap (a few hundred, can be obtained for you by your property insurance writer, but generally worthless for the kinds of risks you are exposed to as a board member) and expensive (a few thousand a year, but totally worth it, in my opinion.) If you get sued, you need a company that not only covers the kind of stuff coops board members can get sued for, but that will pay for putting on your defense. Chubb was the only one paying for that when we got it.
Call Robert Mackoul – at the insurance company named Mackoul on Long Island. He does workshops on D&O at the NY coop and condo association conference – he can give you a quote and also will lay out for you what the two types (cheap and expensive) each cover and don’t cover. You probably also need an umbrella policy to back up the D&O. (And, on a totally different topic, if you don’t have a personal umbrella policy to back up your own coop and auto policies, you will probably figure out, as I did, that it is a wise idea to get a personal umbrella policy yourself.)
You can find out more resources from articles not only in cooperator.com, but also on the cnyc.com website – a great resource for small coop board members – and cheap for coops to join. Their annual conference provides a wealth of information, too, on issues like this one that you need to learn about as a board member.
All (or most, or at least all I’m aware of) NY coops are organized under the statute that covers for profit businesses. But the insurance companies write the policy as if you are a non-profit, because that’s essentially what you are. Because you aren’t really running a for-profit business (not in your typical small, self-managed coop anyway – I really don’t know if or how that changes if you have commercial tenants, as we didn’t).
Yes, it costs us about $1,700 a year for a 12 unit coop. Ours is thru Chub.
yes it is typical for for the board to obtain d&o insurance. Your broker would be a place to start, else look on the cooperator website. I don’t recall what it costs but it’s not a lot.