Asked and Answered
I’ve been asked to serve on the Board of my co-op. Could I be held liable if the co-op is a party to a law suit?Possibly, but in most cases, no. Co-ops and condos maintain directors and officers liability insurance (known as “D&O coverage”) for the protection of the individuals serving as officials of the co-op or condo. Although directors and officers are sometimes named as parties to litigation brought against the building, in the vast majority of cases, those parties are protected against personal liability by such insurance and by the indemnification provisions of the governing documents of the co-op or condo. Whether or not the co-op or condo in question maintains adequate “D & O” coverage should be considered before serving as an officer or director. If the co-op or condo doesn't maintain D&O coverage, that's a major red flag and serving on the board is probably a bad idea. In any event, officers and directors are rarely held personally liable for actions taken in good faith in such person’s official capacity (known under a doctrine of corporate law in New York called the “Business Judgment Rule”). It is only when an officer or director acts outside his or her scope of authority or violates the law (particularly the laws against discrimination) that personal liability can arise, as such acts can be excluded from the co-op or condo’s insurance coverage. Serving on a Board can be a significant time commitment, depending upon the size of the building and the complexity of the issues that must be addressed. At the end of the day, serving on a Board can be a satisfying and useful experience and a good way to have a degree of control over how your co-op or condo is managed.
