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HOA's consist of volunteer board members that contribute to the development of rules, regulations, improvements and maintenance of their respective buildings. Their work creates value to the homeowners by helping to plan and supervise the administration of their common property.
The decisions undertaken by the Board of Directors may create risk to third parties, mainly against homeowners which may cause them to take action against their board members. Both administration and board of directors are at risk of lawsuits against them regardless of its justification. Lawsuits create huge expenses with serious legal repercussions. It is not unheard of that jail time has been used in sentencing. The list below shows some possible scenarios where a board member could be held responsible by a third party.
Keep in mind that the approach to lawsuits in Mexico is changing in expat communities mainly because foreigners come from a culture that has a more litigious nature. There is a higher risk if there are contracts or agreements signed where the "applicable legislation" is from those countries.
An Errors and Omissions insurance policy is specifically designed for board members and administrators of homeowner’s associations in Mexico. It was created by Novamar years ago, and now is actively presented and purchased in major resort areas by homeowner’s associations throughout Mexico. The advantage to HOA's approving the purchase of a Legal Liability insurance policy is that the boards are seeing an increase in the numbers of people willing to volunteer for board positions.
This Professional Legal Liability insurance policy insures the board members and administrators by, protecting them individually for lawsuits initiated by their fellow homeowners and other third parties. This coverage is otherwise not included in the general liability section of their Master Insurance Policy. (The general liability insurance included in each Master Insurance Policy for an HOA only protects the board as an entity; i.e.; the AC in Mexico, not each individual board member.)
With the Novamar Board of Directors Professional Liability Insurance policy, the insurance company agrees to pay the legal fees and compensation that the Insured (Board member(s), and/or Administrator) owe to a third party because of Professional Civil Liability. In this policy, all the homeowners are considered “Third Parties” as well. The damages are comprised of the loss or impairment of the assets or property of the homeowner(s) caused by malpractice, inexperience, or negligence and/or the deprivation of any consequential lawful gain, or the loss or damage of such assets. Extended coverage is also available to include Legal Lawsuit Liability for claims filed against an individual board member in their capacity as a member of the board of directors of their HOA in Mexico, in his/her country of origin.
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