Most community association Board of Directors understand the importance of maintaining Directors and Officers insurance (“D&O insurance”) to protect the Association, Board members, and those who assist the Board, such as property managers and committee members. D&O insurance provides coverage for claims for “wrongful acts” committed or alleged to be committed by a Board member or someone else insured under the policy. Unfortunately, what many Directors do not understand is that to preserve coverage under a D&O policy, the policy requires that an insured under the policy provide the D&O insurer with timely notice of any threats of lawsuit that it receives that may be covered under the policy. Otherwise, the D&O insurer may deny coverage of the claim.
In the case of Taylor v. State Farm Fire & Casualty Company, decided by the Georgia Court of Appeals in September 2018, a former Association committee member of the Regency Oaks Neighborhood Association, Inc. (the “Association”), Regina Taylor, learned the importance of timely reporting claims the hard way. In this case, Taylor sued the Association after leaving her committee member position with the Association, and the Association brought counter-claims against her. In January 2015, after filing her lawsuit against the Association, Taylor sent a copy of her lawsuit to the Association’s D&O insurance carrier, State Farm, to notify it of her claims against the Association. State Farm appointed defense counsel to defend the Association against Taylor’s claims.
However, Taylor did not notify State Farm of the Association’s counter-suit against her and ask that it cover the Association’s claims against her under the policy until over a year later, in July 2016. Even though Taylor was potentially insured under the D&O policy since she was a former Association committee member, State Farm denied coverage of her claim.