I am on my community association board in Northern Virginia. There has been talk that the directors insurance is no longer needed due to a law passed in the last couple years protecting them. Is this true?




While there are provisions in the Condominium Act and Property Owners Association Act designed to protect directors, the idea that such laws negate the need for insurance coverage is misplaced.  Also while these laws protect you they do not provide for payment of your attorney fees to defend yourself unless you prevail.

Actually, amendments to the Code passed in 2007, now require associations to maintain a fidelity bond or employee dishonesty insurance policy to cover an association whose funds are stolen or embezzled.  These new legal requirements were instituted in response to a few well-publicized and horrific cases of theft of replacement reserves and dues a few years ago.  The exact wording of these requirements can be found in 55-79.81(B) of the Condo Act and 55-514.2(B) of the POA Act, but you are essentially required by law to maintain coverage of at least $1 million, or the amount of reserves plus ¼ of the annual assessments for the entire association, whichever is less.  The absolute minimum amount of coverage required (for very small associations, or associations with little or no common expenses and/or reserves) is $10,000. 

Thus, in addition to the reasons listed in the 2006 articles on this blog [], recent changes in the law now require you to have this coverage, instead of allowing you to forego obtaining it.