D&O Claims-Made Coverage Issues for Community Associations
by Brit Weimer
Community associations often rely on directors and officers (D&O) insurance when homeowners challenge board decisions involving covenant enforcement, elections, assessments, architectural review, maintenance obligations, or alleged breaches of fiduciary duty. But because most D&O policies are written on a claims-made basis, coverage frequently depends less on when the alleged conduct occurred and more on when the claim was first made and reported. That timing distinction is critical for HOAs, condominium associations, and other community associations because governance disputes often develop gradually over months or years.
The first issue is whether a homeowner communication actually qualifies as a “claim.” Insurers may argue that an earlier complaint, records request, board-meeting objection, or threat of litigation triggered the policy’s reporting requirements. Associations should not accept that characterization without carefully reviewing the policy language. Courts generally focus on the policy’s definition of “claim,” and many policies require a written demand, lawsuit, administrative proceeding, or request for specific relief. At the same time, once a potentially covered claim exists, prompt and detailed notice is essential. In Genesis Insurance Co. v. Crowley, 495 F. Supp. 2d 1118 (D. Colo. 2007), the court held that notice was sufficient where the insured reported allegations of misconduct and provided supporting documentation during the reporting period.
The second issue is related claims. Community association disputes often start informally and escalate: a homeowner complains to the manager, counsel sends a demand letter, the board holds a hearing, and litigation follows later. Many D&O policies treat claims arising out of the same or related wrongful acts as a single claim made when the earliest related claim was first made. Insurers may use those provisions to argue that a new lawsuit relates back to an earlier policy period. Associations can respond that the later lawsuit involves different claimants, different board decisions, distinct alleged wrongful acts, or different damages.
The third issue is prior knowledge. Insurers sometimes contend that the association “knew” before the policy began that a claim was likely. But routine homeowner dissatisfaction is not the same thing as knowledge of a likely D&O claim. Association boards regularly face criticism over enforcement, assessments, meetings, elections, reserves, and maintenance. Under cases such as Cohen-Esrey Real Estate Services, Inc. v. Twin City Fire Insurance Co., 636 F.3d 1300 (10th Cir. 2011), the relevant question is whether the insured had a reasonable basis to expect a claim — not simply whether some disagreement existed in the community.
Finally, associations should treat policy renewals and carrier changes with care. Retroactive dates, prior-acts coverage, extended reporting periods, and notice deadlines can determine whether a D&O claim is covered. In Craft v. Philadelphia Indemnity Insurance Co., 343 P.3d 951 (Colo. 2015), the Colorado Supreme Court held that the notice-prejudice rule does not apply to claims-made policies because timely reporting is part of the coverage itself. For associations, the practical lesson is clear: significant owner disputes should be evaluated and reported early, especially before changing carriers.
For a more detailed discussion of D&O and related EPL coverages, see our article, Weimer, Management Liability Coverages: EPL and D&O Insurance Demystified, 54 Colo. Law. 48 (Jan./Feb. 2025).
If you would like help evaluating the pros and cons of submitting a D&O or CGL insurance claim on behalf of the association, the experienced lawyers at Moeller Graf are available to assist. This information should be viewed as informational and not direct legal advice.