For condo board members in Florida, the prospect of personal liability can be a concern. Understanding the circumstances under which personal liability may arise and how to mitigate it is essential. This blog post delves into common scenarios where condo board members may face personal liability and offers guidance on avoidance and minimization.
Breach of fiduciary duty
A primary source of liability for condo board members stems from their fiduciary duty to the association and its members. This duty requires members to act in the organization’s best interest, exercising reasonable care and diligence. Violating this duty through actions like fraud, self-dealing or willful misconduct can lead to personal accountability.
Other breaches of fiduciary duty may involve misappropriating or mismanaging association funds. It could also be neglecting to maintain adequate insurance or reserve funds, or failing to conduct required audits or financial reports. Violating Florida’s Condominium Act (Chapter 718 of the Florida Statutes) or disregarding conflicts of interest or material facts also qualify as potential breaches.
Condo board members may face liability through negligence or tort claims, which arise from civil wrongs causing harm or injury. Negligence claims usually target the association rather than individual board members, considering the association as a distinct legal entity acting through its board. Personal liability for negligence typically requires actions outside the scope of authority or malicious intent.
Board members can protect themselves from personal liability by securing adequate insurance coverage. Directors and Officers liability insurance is a common choice, covering legal expenses, settlements and judgments related to board service. However, D&O insurance may have limitations, exclusions or deductibles, leaving board members partially exposed.
D&O insurance may not cover claims involving fraud, criminal acts, intentional harm, bodily injury, property damage or personal profit. Careful policy review is crucial for board members to understand coverage specifics.
Seeking indemnification from the association is another protective measure. Indemnification involves the association reimbursing legal expenses or damages resulting from a lawsuit related to board service. While it can be a valuable safeguard, indemnification is not automatic or limitless. Conditions and limitations may apply, such as the board member acting in good faith and the association’s financial capacity.
In summary, condo board members in Florida may face personal liability in certain situations, contingent on the nature of the claim, liability source and available insurance coverage or indemnification. To minimize personal liability, board members should act in the association’s best interest, comply with relevant laws, seek expert advice, review insurance policies thoroughly and explore indemnification options.