Minnesota Townhome and Condominium Director Liability  and Indemnity Clauses

In Minnesota, town home and condominium associations conduct their business through a Board of Directors.  Often, the individual condominium or town home association board members are faced with decisions that are not popular or which may create a hazardous situation.  As a result, it is pertinent to ask whether board members face any liability for those decisions. In Minnesota and across the nation community association board members have been sued much like any other business.  There have been lawsuits filed for discrimination including discriminatory hiring and firing, contractual issues including tortious interference with a sales contract, and challenging rules that prohibit homeowners from possessing pets.  The person suing could be a unit owner, a user of the property, an employee or a contractor.   Obviously, such lawsuits can be costly even if they have little merit.   Even worse, however, they may expose both the individual board members and the association to financial disaster if a proper directors and officers (D & O) liability policy is not in place. Many associations do not acquire adequate liability policies.  It is human nature not to plan for the worst.  Unfortunately, a failure to properly scrutinize potential liability issues can create grave risk to the association and its Board members.  That is  particularly true since Board members often have a false sense of security believing that they are shielded from personal liability based upon association declarations that generally include indemnity clauses.   An indemnity clause requires the association to indemnify their board members.  That means the association must pay to the director any costs or judgments resulting from a lawsuit.  In many instances these liability clause only provide for reimbursement to the director after the cost has been incurred and paid.  Additionally, the  security instilled by indemnity clauses can be quickly shattered when an association  does not have enough money budgeted to pay those costs. In order to ensure that the Directors and Officers policy provides sufficient coverage,  you should be sure to check with an  attorney and other informed professional advisers to determine what areas should be covered. Call 612-240-8005 for a Consultation on your Association Matter.
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