Through
the years this blog has covered several aspects of Board member liability. One additional item for your consideration is
the use of indemnification agreements.
These provide a more inclusive
protection than what you might find in State statutes or your community's governing
documents. These agreements contain detailed procedures and time frames - and clarify the types of claims covered. If you decide to utilize this option,
consider clarifications in the following areas:

Fees-on-Fees. Directors are not necessarily entitled coverage
for legal costs needed to sue the Association to enforce your indemnification
rights - be sure this is added!
Insurance. Require that the Association have its D&O
coverage audited to obtain the highest quality insurance available in the
homeowner association industry.

Procedures and Timing. The agreement can require that the Association,
when settling a claim against you, include an unconditional release from all
liabilities relating to the proceeding, along with an acknowledgement that you
deny all wrongdoing. Require all indemnification payments be made within
30 days, and all advances within 20 days of a written request. In the event of an adverse ruling, you can appeal,
and be indemnified for all expenses. Include a presumption in favor of
indemnification, that you have met the applicable standards of conduct allowing
for indemnification, and that a judgment, settlement, or criminal conviction
does not create a presumption against indemnification. And impose a
reasonably short period on any claim that the Association might have against you.
It is important
that you require immediate money advances to cover defense costs, regardless of
whether you are the subject of a lawsuit, investigation or witness subpoena,
with coverage continuing for your legal expenses - even after you leave the
Board.
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