Protection of HOA Directors and Officers Against Personal Liability
Volunteer officers and directors are not personally liable to third parties for monetary damages from their negligent acts or omissions in the performance of their duties. These protections are necessary, otherwise it would be extremely difficult or impossible to recruit people to serve on association boards. The following protections exist:
- Directors and officers liability insurance protects against errors and omissions made while serving as a director or officer.
- The Davis-Stirling Act protects volunteer board members from personal liability provided they meet certain criteria. (Civ. Code 5800;) They are also protected under California Corporations Code Section 5047.5, 5239 and 7231. In addition, directors and officers can be indemnified by their association if they had no reasonable to believe their conduct was unlawful. (Corp Code 7237.) The Corporations Code extends further protections under the Business Judgment Rule.
- Usually, an association's CC&Rs and bylaws contain exculpatory language as well as hold harmless and indemnity provisions protecting officers and directors from liability for negligent acts and omissions while in office.
Protection from liability does not extend to gross negligence, intentional misconduct, self-dealing transactions, criminal behavior, hate crimes, sexual misconduct, intoxication, drug use, or violations of civil rights laws. (Corp. Code 5047.5) A finding by a jury that individual directors and officers are not liable does not preclude a verdict against the association itself. A greater degree of fault is necessary to hold unpaid association board members liable for their actions on behalf of the association. (Ritter & Ritter, Inc v. Churchill Condominium Assn, 166 Cal. App. 4th 103.)
This information is provided for educational purposes and is not intended as legal advice. For legal advice, contact an HOA attorney licensed in California.
Coast Management of California