Corporation, Management and Director Indemnity – The need for Directors and Officers Insurance

October 2019

Condo living is based on the collective responsibility of condo owners to take upon themselves the management of their condo corporation.  This includes not only paying condo fees and abiding by rules but also serving on committees and as directors of the corporation.

There are laws and insurance to protect board members and owners against liabilities that typically do not exist for individual owners.

Condo directors frequently employ a management company or condominium manager to handle many of the tasks of condo management.  Both the board and management company need to be protected against liabilities and actions taken by the other.  This is done by both parties agreeing to a management contract that includes an indemnification clause.

Indemnity is a term meaning protection against injury, loss, damage, or related costs.  In condo communities, board members require protection from owners who wish to make directors personally responsible for certain actions.  Directors and condominium managers require protection against possible liabilities.

Another concern is that a condo corporation should not be responsible for contractor errors.  A contractor causing damage while working on corporation property should be held responsible.  They may have insurance to assure corporations they are capable of taking on this responsibility.  Indemnity protects condo directors and management from being held responsible for this damage if a contractor does not fulfill this obligation.

The Condo Act provides directors with indemnity.  Neither the Condo Act nor indemnity clauses in contracts can prevent individuals from being sued and having to prove they acted properly.

Condo corporations may maintain directors and officers insurance to provide directors with additional liability protection.

Indemnification usually requires that parties have acted in good faith – honestly and fairly.  An individual who has not acted in good faith may find they are not protected by either the Condo Act or directors and officers insurance.