The director plays a leading role in a co-ownership; as a mandatary of the syndicate of co-owners, he ensures the smooth running of the immovable’s day to day business which implies a working knowledge of the tasks related to this function. As such, directors must act with prudence, diligence, honesty and loyalty because they evolve in a legal environment where their civil liability can be sought as part of their mandate on behalf of the co-ownership as well as towards third party members.
Multiple risks
The members of the board of directors incur their personal liability from faults committed in the performance of their duties and so, whether they receive remuneration or act as volunteers; in such a case, they would have to assume financially the resulting prejudices as long as the latter are in direct relation with the faults reproached to them.
The director is responsible for the initiatives taken with regards to the co-owners; as a party in the resolutions adopted by the board of directors, he engages his liability and thus, if he does not wish to be held liable for a decision taken by this same board of directors, he must dissociate himself from it by recording his dissent in the minutes or in what is in lieu of them and so, in accordance with section 337 of the Civil Code of Québec.
Obligation to insure
Concerning the liability of the members of the board of directors, Bill 141 inserted as of April 15, 2021 in the Civil Code of Québec the obligation for the syndicate to take out civil liability insurance for each member of the board of directors.
Purpose of the coverage
Civil liability insurance of the directors covers their personal liability and protects them from the financial losses resulting from faults committed or alleged in the performance of their duties; it limits the financial consequences that they're indebted towards their property. Furthermore, insurance of the directors protects them by helping them defend themselves, that is to say by paying the fees associated to professional fees such as lawyer fees and other court fees.
Insurance coverage amount
The declaration of co-ownership usually specifies the minimum amount of civil liability insurance coverage which can vary between the directors and the co-owners; it is important to periodically reconsider this amount in light of changing responsibilities and associated risks. A consultation with an insurance broker is recommended to assess the possibility of increasing the insurance coverage to $2 000 000 or more for optimal protection.
Exclusions
In addition to the usual exclusions, the civil liability insurance of the directors generally excludes any damage resulting from insufficient insurance coverage in the syndicate's insurance policy; for instance, this may be the situation when there is insufficient coverage resulting from a declared value that does not correspond to the reconstruction cost of the building. In such a case, the directors at fault are exposed to compensate the co-owners and the third party members having suffered a prejudice.
WHAT YOU SHOULD KNOW! The civil liability of a director could be engaged whether he's paid or not and therefore, the syndicate must take out insurance covering the civil liability of the directors for their acts performed in the duties of their functions.
WHAT TO KEEP IN MIND: A co-owner or a third party member should never accept to occupy the function of a director if the syndicate does not take out insurance covering the civil liability of the members of the board of directors because the financial consequences resulting from errors or omissions could considerably affect their patrimony.
WARNING! It is important to note that the requirements for the amount of civil liability insurance coverage for directors differ from those applicable to co-owners.
