How to Avoid Liability Issues in Your HOA

“You are liable.” Just the phrase may conjure up chills. It’s one that no Association board member ever wants to hear when it comes to an accident. Although serving on a board is a highly rewarding job and a chance to serve the community in a meaningful way, the idea of having to deal with legal issues might be daunting. 

In any community, especially one with amenities and common areas, accidents are bound to happen. So the question is: what are the Board of Trustees typically liable for? In most cases, such as a slip-and-fall near the pool, board members typically aren’t personally liable. Still, it’s important to remain as cautious and aware as possible in order to rid yourself of any liability risks. Here’s what you can do to stay safe (while keeping your community safe):

Get Insured

This first step is essential. As a board member, should you be personally named in a lawsuit, a type of insurance called Directors and Officers (“D&O”) will be an incredible form of protection. You could potentially face high fees due to litigation costs, but a good D&O insurance policy will reimburse you for “any costs and expenses resulting from your action as a board member, including any costs of litigation.”  

In addition, general liability insurance — which covers the Association itself — can offer some protection for board members as well. However, this may not be as substantial as D&O, and you should take a look at the terms of your Association's general insurance policy in order to gauge how much protection you’ll have. 

Manage Your Risk

The next step is to implement a smart risk management plan. Because this topic may not be within a board member’s typical scope of knowledge, it’s important for the Board of Trustees to seek help from advisors such as its management company or an attorney. A good plan will help to minimize risk, which ultimately reduces the chance of high insurance and legal costs. 

Laying out the important steps for sound risk management is crucial. They involve “identifying and analyzing the exposure to loss, determining alternatives to handle the risk, selecting the best alternative, implementing the alternative to manage the risk, and monitoring and adjusting the risk management program when needed.”

Take a common slip-and-fall case for example. When one community suffered high liability losses for this kind of claim on the property, which increased their insurance premium immensely, they implemented a strong risk management program to prevent problems in the future. After a thorough risk analysis, the community’s leaders took charge — they developed and distributed a safety manual, upgraded their accident report process, and implemented a maintenance log. These precautions proved successful in quelling future problems. It’s only further proof of how important it is to be highly proactive when it comes to safety. 

Stay Alert to What’s Happening

Another effective way to prevent risks, as well as encourage community involvement, is to identify any damaged infrastructure and deal with it before it causes an accident. This could mean anything from cracks or raises in a sidewalk or a faulty elevator. Encourage residents to look out for these problems and report them before something gets out of hand. Just because issues may seem minor and inconsequential, it doesn’t mean that they won’t cause a major problem in the future.

The Board of Trustees and residents alike can play a big role in preventing major financial losses due to liability claims. When both parties are on the same team (along with outside help when needed), the community is more likely to function in sync and avoid harmful problems. As a board member, you certainly want to keep everyone safe just as much as you’d like to protect your budget. Managing risk and encouraging smart behavior will help you to keep your community intact and running smoothly.