Under the Davis Stirling Act of 1985 volunteer directors and officers will not be personally liable is excess of the coverage of insurance specified if they meet the following criteria:
- the act or omission was performed within the scope of the directors duties.
- the act or omission was performed in good faith
- The act or omission was not willful, wanton or grossly negligent
- the association had in effect at the tome of the incident a policy or policies of insurance covering general liability and directors and officers liability of not less than $500,000 if the association had 100 or fewer members and $1,000,000 if the association had more than 100 members.
That said the association may be sued for more than these limits. Nothing in the act shall be construed to limit the association for its negligent act or omission or any negligent act or omission of any director. So a small association might be prudent to purchase insurance in excess of the mandatory limits of $500,000.
A blanket umbrella insurance policy increasing the underlying li8mits of $500,000 by a million or two would not cost too much compared to the costs of just defending a claim for a large sum. Sometimes a carrier will determine that the policy limits will be expended and they will offer to settle the claim for the policy limits to save further aggravation and the costs of defense and a trial plus possibly enormous awards. Buying larger limits will tend to avoid that albeit remote possibility. One exclusion that needs to be bought out of these types of policies is that of discrimination. California in particular dislikes discrimination so this form of additional coverage is extremely valuable and cannot be omitted. Directors do not normally choose to discriminate but many board of directors will make a decision that is particular to one individual or family only to reverse themselves in the future with a similar set of circumstances. Sometimes the action is simply the act of a new group of people leading the association with no malice aforethought. But the possibility of these types of acts is not uncommon.