Board Liability
Nevada Revised Statutes Chapter 116 states that "in the performance of their duties, the officers and members of the executive board are fiduciaries . . . and are required to exercise the ordinary and reasonable care of directors of a corporation, subject to the business judgment rule." Further, Nevada Revised Statutes Chapter 82.221 provides that "Directors and officers shall exercise their powers in good faith and with a view to the interests of the corporation." The California Court of Appeals explained that a Board members' fiduciary duties "take on a greater magnitude in view of the mandatory association membership required of the homeowner." The Court, in that case, concluded that the board breached their fiduciary duty of acting in good faith because the Board failed to exercise their supervisory and managerial responsibilities.
How can a Board member protect himself or herself from liability? Rely on experts! Nevada Revised Statutes Section 82.221(2), which applies to non-profit corporations, states that in performing their respective duties, directors and officers are entitled to rely on information and opinions provided by experts. In the case of Carney v. Donley , certain Board members were sued individually. The Court of Appeals held that the board did not breach its fiduciary duty because the board sought and relied on legal advice and there was no evidence to establish that the board acted unreasonably or failed to exercise properly its business judgment.
A Board will generally be shielded from legal liability where the Board (1) acts upon reasonable investigation, (2) exercises basic duties of good management, and (3) relies on legal advice.