Keys to Protecting Your Condominium Association’s Board of Directors

Can Atlanta Condominium Board Members Be Personally Liable?

We frequently are asked whether volunteer board members can be civilly liable for actions taken while a board member.  This issue is of serious concern because lawsuits tend to be over inclusive, naming every possible defendant in the initial complaint. Why sign up as a volunteer board member if it could bankrupt you?

The Good News

The good news is that your liability as a board member can be limited as provided in the Articles of Incorporation or Bylaws of the association.  Georgia Code 14-3-858(a). Georgia Code 14-3-858(a) authorizes a non-profit corporation to include a provision in the Articles of Incorporation or Bylaws to indemnify and reimburse directors to the fullest extent provided by law and to advance expenses to a director who is the subject of any legal proceedings. However, if a director engages in willful misconduct or a knowing violation of criminal law, he or she will be liable for damages and cannot be indemnified by the association.  Georgia code 14-3-851.

The Bad News

Although you may not be liable for damages, these statutes do not make you immune to a lawsuit. You can still be sued because, as we say, “anybody can be sued by anybody for anything at any time.” In that case, you will want to know who will pay or reimburse you for your attorneys’ fees.

Does Your Atlanta Condominium Association Have D&O Coverage?

Again, there is good news here, also, but it is important to know a) whether your organization has a directors’ and officers’ insurance policy (known as D&O coverage) to cover your attorneys’ fees in defending a lawsuit and b) whether your governing documents indemnify you for any expenses you incur in such a lawsuit. Most indemnification provisions for directors and officers will be found in the corporation’s articles of incorporation or bylaws.

Permissive Indemnification of an Atlanta Condominium Board Member

There is also statutory indemnification. Georgia Code 14-3-851 does not require a corporation to indemnify you but it does permit a corporation to indemnify a director against liability incurred in the proceeding. The statute permits indemnification if the director conducted himself in good faith and believed that, in the case of conduct in his official capacity, that his conduct was in the best interest of the association, and in all other cases that he had reasonable cause to believe that his conduct was not opposed to its best interest. If the case involves a criminal proceeding, the corporation may indemnify the director if he had no reasonable cause to believe that his conduct was unlawful.

Mandatory Indemnification of an Atlanta Condominium Board Member

There is also mandatory indemnification provided by statute in Georgia Code 14-3-852.  Georgia law requires a corporation to indemnify a director who is successful in defending a proceeding where he is a party because he is or was a director of the corporation.

Know What Your Atlanta Condominium Association Covers

It is important to know whether you are protected from the expenses of a lawsuit when you volunteer to serve as a director or officer of a community association. Have your association attorney review the D&O insurance policy. The attorney can also review the articles of incorporation and bylaws to determine whether the association is obligated to pay or reimburse you for any expenses incurred in a lawsuit. Your volunteer service as a board member should not cause you financial ruin, make sure you are protected.

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