BOARD MEMBER IMMUNITY
WASHINGTON DC CONDOMINIUM LAW ATTORNEYS
By Nicholas D. Cowie of Cowie Law Group, P.C.,
Washington DC Condominium Law Attorneys
Condominium Board Member Immunity From Personal Liability Lawsuits
Question:
Are Washington DC condominium association board of director members and officers (collectively “board members”) subject to personal liability for decisions they make on behalf of an association? As Washington DC condominium law attorneys we are often asked this question when difficult decisions need to be made by a condominium board of directors.
Answer:
In general, one cannot sue individual board members personally for their decisions or actions on behalf of of a Washington DC condominium association. Instead, suit can only be filed against the condominium association as a legal entity. This immunity from personal liability for board members applies to “tort and contract liability” (discussed below).
Broader immunity against “civil liability” is afforded board members of incorporated Washington DC condominium associations so long as board members adhere to statutorily prescribed good faith standards, and the incorporated association maintains statutorily prescribed liability insurance at specified rates (discussed below).
Background – Washington DC Condominium Immunity Laws
Condominium associations make decisions and act through their board members, a group of unpaid unit owners volunteers who have taken on the role of governing the condominium association. These volunteers are responsible for establishing annual budgets, maintaining common areas, and enforcing rules and regulations. Decisions and actions of the condominium association can result in lawsuits by disgruntled unit owners or third parties such as visitors injured on common property or discharged vendors. Sometime these lawsuits will name one or more of the association’s individual board members and seek to impose personal liability upon them for participating in making the decisions that have aggrieved the person filing the lawsuit.
The rationale behind the Washington DC condominium laws providing legal immunity to board members is to encourage unit owners to serve as unpaid volunteer directors and officers of their condominium associations. Without this immunity, unit owners would be discouraged from volunteering as board members for fear of being dragged into lawsuits for their efforts on behalf of the condominium.
Washington DC Condominium Immunity Law for “Tort and Contract Liability”
Washington DC condominium law provides immunity to condominium board members against personal liability in “tort and contract” lawsuits by requiring such suits be brought only against the condominium association as opposed to its individual board members.
Tort Liability
An example of “tort” liability would be a negligence lawsuit in which a unit owner sues the condominium association and its individual board members for their alleged carless, or “tortious,” decisions made on behalf of the association resulting in damages to the suing unit owner. Under Washington DC condominium law such a lawsuit can only be brought against the condominium association: “[a]n action for tort alleging a wrong done … by any [board member] … shall be brought against the [condominium] association ….” DC Code § 42–1903.09(a)(1).
Another example of a tort liability would be a personal injury suit in which a visitor to the condominium is injured by a dangerous condition in the condominium common elements which the association is tasked with maintaining. In such a suit, the visitor might allege that the dangerous condition causing the injury is the result of the negligent failure of the condominium association and it’s board members to properly maintain the common elements. Under Washington DC condominium law such a lawsuit can only be brought against the condominium association: “[a]n action for tort alleging a wrong done … in connection with the condition of any portion of the condominium which the [condominium] association has the responsibility to maintain,… shall be brought against the [condominium] association ….” DC Code § 42–1903.09(a)(2).
Contract Liability
An example of contract liability would be where an unpaid vendor enters into a service contract with the condominium association and sues the association and it’s individual board members for for breach of contract. Under Washington DC condominium law such a lawsuit can only be brought against the condominium association: “[a]n action arising from a contract made by or on behalf of the [condominium] association, its … board [members], or the unit owners as a group, shall be brought against the [condominium] association ….” DC Code § 42–1903.09(c).
Declarant Liability for Tort or Contract Claims Against the Association During Period of Developer Control
If a tort or contract lawsuits against the condominium association arises during the time that the declarant controls the association (“the period of declarant control”), then, under Washington DC condominium law, the person filing such a suit must bring it against the declarant, not the condominium association. DC Code § 42–1903.09(a) and (b).
Condominium associations should consult with a Washington DC condominium law attorney whenever a lawsuit is threatened or filed against the association and/or its individual board members to determine next steps, including notifying the association’s insurance carrier.
Washington DC Immunity Law Based on Conduct and Insurance Coverage
Washington DC law also provides immunity from “civil liability” (not just tort and contract liability) to board members of condominium associations that are incorporated. Specifically, the law provides that “[a]ny person who serves as a volunteer of [a] corporation shall be immune from civil liability….” DC Code § 29–406.90(b). Since board members are unpaid volunteers, this immunity law applies to to board members of any condominium association that is a corporation. Under Washington DC condominium law, a condominium association is a recognized legal entity that can be either incorporated or unincorporated. DC Code § 42-1903.01(a). The Washington DC condominium law attorneys at Cowie Law Group, P.C. can assist with incorporating an unincorporated condominium association in order to take advantage of these laws.
Generally, there are two conditions to immunity for board members of corporate condominium associations:
- First, at the time of the lawsuit, “the [incorporated condominium association must] maintain[ ] liability insurance with a limit of coverage of not less than $200,000 per individual claim and $500,000 per total claims that arise from the same occurrence.” DC Code § 29–406.90(c).
- Second, the conduct of the board member allegedly causing the “injury or damage” in the lawsuit must not be as a result of improper or illegal conduct on behalf of the board member defined as: “(1) [t]he willful misconduct of the [board member]; (2) [a] crime, unless the [board member] had reasonable cause to believe that the act was lawful; (3) [a] transaction that resulted in an improper personal benefit of money, property, or service to the volunteer; or (4) [a]n act or omission that is not in good faith and is beyond the scope of authority of the [incorporated condominium association] pursuant to [DC corporation statutes] or the corporate charter [of the incorporated condominium association].”DC Code § 29–406.90(b)(1)-(4).
For Washington DC condominium associations, who are considering incorporating, this additional statutory immunity afforded to corporate volunteers under Washington DC immunity law is one reason that favors incorporation for condominium associations. A condominium association that wants to attract and keep board members, might consider incorporating and maintaining, at a minimum, the statutorily prescribed liability insurance (DC Code § 29–406.90(c)) in order to obtain the benefit of the statutory immunity against the “civil liability” for its board members. Washington DC condominium law (D.C. Code § 42–1903.10(b)) and condominium governing documents (e.g., bylaws) already require associations to obtain liability insurance. Directors and officers liability insurance (“D&O”) that covers associations and their board members from from lawsuits, based on the actions or in actions of an associations, board of directors, should also be included as part of an associations risk management plan. Contact one of the Washington DC condominium law attorneys at Cowie Law Group, P.C. for more information about board member immunity, risk management planning, and the pros and cons of incorporating an unincorporated condominium association.
Business Judgment Rule and Washington DC Condominiums
Although the immunity statute quoted above (DC Code § 29–406.90) only applies to incorporated condominiums, the “business judgment rule,” adopted by Washington DC Condominium law, provides similar protection in the form of a legal defense to lawsuits filed against associations and their board members board members, regardless of whether the condominium is incorporated: “[t]he decisions and actions of the [condominium] association and its … board [members] shall be reviewable by a court using the ‘business judgment’ standard.” DC Code § 42–1902.09. In many cases a Washington DC condominium law attorney can have a lawsuit dismissed as to the individual board members based on the statutes cited above relative to “tort and contract liability” and “civil liability,” in the case of a corporate condominium association. However, if a lawsuit were to go forward, a board member will be protected by the “Business Judgment Rule” defense under which courts will not second guess a board’s decisions made within the scope of the board’s authority if those decisions were reasonable, made in good faith and with the best interest of the association in mind, even if the decision ends up being a bad one and a mistake in hindsight. Contact a Washington DC condominium law attorneys at Cowie Law Group, P.C. for more information about director an officer immunity.
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NOTE ON TERMINOLOGY: Under the District of Columbia Condominium Act, a condominium association is known as a “unit owners’ association,” and the board of directors of a unit owners’ association is known as an “executive board.” For purposes of convenience, the more common terms “condominium association” and “board of directors” are used in the article.
NOTE ON LEGAL ADVICE: This Article should not be relied upon as a legal advice applicable to any specific case concerning Washington DC condominium board members. Rather, it is a general statement of legal principles that may or may not apply to your Washington DC condominium association. The individual facts of each case need to be analyzed to determine the application of law. Speak with a Washington DC condominium law attorneys at Cowie Law Group, P.C. for a consultation relative to your specific situation.