D&O Liability Insurance for Quebec Condo Directors

In a divided co-ownership, the directors on the board of directors (board) make decisions every day that affect common expenses, work on the common portions and the application of the declaration of co-ownership. A dispute, omission or conflict of interest can quickly lead to a personal claim against them.

Directors and officers liability insurance (often called “D&O”) is specifically designed to protect these volunteers and, where necessary, the syndicate. In Quebec, it is not required by the Civil Code of Quebec, but it has become a good governance practice for limiting risks and securing condo management.

This guide explains what this insurance covers, the legal basis for directors’ liability, common claim scenarios and how to choose a policy suited to your syndicate.

What is D&O insurance in a divided co-ownership?

D&O insurance protects past, present and sometimes future directors against claims alleging a management error: negligence, omission, error, misrepresentation, breach of a fiduciary duty or good-faith decisions that cause financial harm.

Key points to remember:

• Claims-made format: the policy responds to claims made during its period of validity (rather than on the date of the act). The history (retroactive date) and extended reporting periods are therefore important.
• Defence costs: lawyers’ fees and costs related to the file are generally covered, sometimes within the limit and sometimes in addition to it. Check the wording.
• Insured parties: in addition to board members, some policies include volunteers, advisory committees and the syndicate (entity coverage) for allegations of management misconduct.
• Typical exclusions: proven fraudulent or dishonest acts, illicit gains, bodily injury and pure property damage (which generally fall under commercial general liability or the syndicate’s property insurance), criminal fines, pollution and certain contractual disputes.

For an overview of good administration practices in divided co-ownership, consult the resources of the RGCQ (Regroupement des gestionnaires et copropriétaires du Québec).

• RGCQ – Resources for directors

Directors’ liability in Quebec: legal reminder

Directors of a syndicate are directors of a legal person within the meaning of the Civil Code of Quebec. They must act prudently, diligently, loyally and honestly, in the interest of the syndicate, while avoiding conflicts of interest and complying with applicable practices and the law. These general duties of directors (sections 321 and following of the Civil Code of Quebec) apply to the board of directors of a syndicate (section 1039 of the Civil Code of Quebec).

Useful references:

• LégisQuébec – Civil Code of Quebec (administration of legal persons, sections 321 and following)
• LégisQuébec – Syndicate of co-owners (sections 1039 and following)

In practice, liability may arise when, for example:

• the board fails to call an annual general meeting in a timely manner or does not comply with the quorum and voting rules set out in the declaration of co-ownership;
• decisions are made contrary to the by-laws of the immovable or the Civil Code (e.g., improper allocation of special assessments);
• a director participates in a decision despite an undisclosed personal interest;
• the board neglects to implement preventive maintenance measures (maintenance logbook / contingency fund study), resulting in significant financial losses.

D&O insurance does not replace these duties; rather, it helps finance the defence and, depending on the policy, certain indemnities in the event of a valid claim.

Common risks and claims against a board

Every divided co-ownership has its own circumstances, but several scenarios arise frequently in Quebec:

• Disputed loss management: the allocation of deductibles or costs between common portions and private portions is poorly documented, leading to a claim by a co-owner.
• Budget and contingency fund: adoption of a budget considered insufficient, failure to update the contingency fund study/maintenance logbook, or delays in work recommended by a professional, causing a decrease in value or increased costs; some co-owners sue the board for management negligence.
• Bidding and contractors: awarding a contract to a contractor who does not hold the required licence, or without verifying insurance coverage. In the event of a default, co-owners may target the board for negligence in the selection process. See the Regie du batiment du Quebec (RBQ) to verify licences.
• Governance and transparency: incomplete meeting minutes, access to documents refused without justification, irregularities during the annual general meeting (quorum, votes, ballots) and allegations that a co-owner’s rights have been infringed.
• Conflicts of interest: a director fails to abstain properly or does not disclose an interest; a decision is challenged and a financial loss to the syndicate is alleged.

Reference resources:

• RBQ – Choosing a contractor carefully
• LégisQuébec – Civil Code of Quebec (general references)

What a D&O policy covers (and excludes)

To properly situate D&O within the syndicate’s insurance program, compare it with commercial general liability insurance and property insurance.

Good practice: require defence costs to be “in addition to the limit” whenever possible, especially for larger divided co-ownerships. Also check whether the policy includes entity coverage for the syndicate in the event of an allegation of mismanagement.

Points to consider when reading the policy:

• Limits and sublimits: adjust them based on the number of units, history and exposure (e.g., critical equipment, pools, parking areas and major projects).
• Deductible: the lower it is, the more the premium may increase. Find a realistic balance.
• Retroactive coverage and extended reporting period: essential when changing insurers or when the board’s membership turns over.
• Exclusions relating to assessments: some policies exclude claims related to the collection of common expenses; others cover them partially. Read the wording carefully.
• External condominium manager: confirm whether the manager is covered as a “de facto officer” or, on the contrary, expressly excluded, and what insurance coverage the manager carries.

To put these requirements into context, the Civil Code requires the syndicate to administer the building soundly in the collective interest (sections 1039 and following of the Civil Code of Quebec). D&O insurance complements this framework by providing financial defence capacity.

• LégisQuébec – Syndicate and administration (sections 1039 and following)

Putting effective D&O coverage in place and maintaining it

Here is a simple plan for equipping your syndicate with suitable coverage:

1. Take inventory of the risks

   • Size of the divided co-ownership (units and towers), technical complexity (roofs, facades and mechanical systems) and history of disputes.
   • Governance: annual general meeting schedule, quality of the minutes, register of board decisions and conflict-of-interest management policies.

2. Define the insurance parameters

   • Per-claim and aggregate limits, deductible and defence costs outside the limit.
   • Inclusion of past and future directors, volunteers, committees and the syndicate as an entity.
   • Retroactive period: keep the earliest possible date when changing insurers.

3. Obtain and compare quotes

   • Prepare a clear file: declaration of co-ownership, by-laws, recent financial statements, budget, information on the contingency fund and contingency fund study/maintenance logbook, and past losses and claims.
   • Request written clarification of exclusions, particularly those relating to assessments and disputes between co-owners.

4. Adopt governance practices that reduce the premium

   • Complete minutes approved promptly after the annual general meeting and board meetings.
   • A bidding process that includes verifying contractors’ licences (RBQ) and insurance coverage.
   • Regularly updating the maintenance logbook/contingency fund study and planning work to avoid risky emergency decisions.
   • Training directors on their duties (prudence, diligence and loyalty) and the procedure for disclosing interests.

5. Maintain uninterrupted coverage

   • Renew on time and preserve retroactive coverage. When changing insurers, negotiate an extended reporting period.
   • Document any potential claim (circumstances) with the insurer within the time limits set out in the policy.

To structure these steps and reduce the administrative burden, see our services for managing the syndicate’s secretariat, annual general meetings and compliance: Administrative management. For budget monitoring, assessments and reporting, also discover our financial management services. More practical resources are available on our blog.

Quick FAQ

Q1. Can the syndicate pay the D&O insurance premium?

Yes. The premium is an expense related to the administration of the syndicate. It can therefore be financed from common expenses, subject to the rules in your declaration of co-ownership and the adopted budget. For the principle governing the allocation of common expenses, consult the Civil Code (sections 1072 and following, allocation of expenses): LégisQuébec

Q2. Is it mandatory in Quebec?

No. The Civil Code of Quebec does not specifically require D&O insurance for directors. However, several declarations of co-ownership require it, and it is strongly recommended to cover defence costs in the event of a dispute.

Q3. Do outgoing directors remain protected?

Usually yes, if the policy provides for a retroactive date covering the period when the alleged act occurred, and if the claim is made during the policy’s validity period (or during the extended reporting period). Check the wording.

This article provides general information and does not constitute legal advice. Consult a lawyer or notary regarding your situation.

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