Does an Illinois condominium association’s directors and officers (“D&O”) insurance policy pay to defend the association when a former board member sues it? Under many policies, the answer is no. In RSUI Indemnity Co. v. Fireside Terrace Condominium Ass’n, Inc., No. 22 C 14, 2026 WL 2837800 (N.D. Ill. Sept. 22, 2026), a federal court held that an insurer had no duty to defend or indemnify a condominium association, its board, a unit owner, or its property manager in a lawsuit filed by the association’s former board president.
The Illinois Condominium Property Act, 765 ILCS 605/1 et seq., requires condominium boards to carry D&O coverage, and many boards assume that coverage will respond to any lawsuit arising out of association business. However, most D&O policies contain an “insured-versus-insured” exclusion, which can leave an association paying for its own defense when the person suing once served on the board. This blog article analyzes the court’s ruling in Fireside Terrace and provides practical guidance for Illinois community associations reviewing their D&O coverage.
Background of the Illinois Condo D&O Insurance Dispute
Kenneth Swiatek, the former president of the Fireside Terrace Condominium Association’s board of managers, filed a lawsuit against the condominium association, five current or former board members, a unit owner, and the association’s property management company. Swiatek sued in his individual capacity and as trustee of two land trusts that owned Units 105 and 108. He alleged, among other things, that the association failed to reimburse him for money he advanced while serving on the board, threatened to evict him from Unit 105, and obstructed him from occupying Unit 108.
The association tendered the lawsuit to RSUI Indemnity Company (“RSUI”), which had issued the association a non-profit management liability policy. The policy required RSUI to defend “any Claim against any Insured for which coverage applies under this policy.” It defined “Insured” to include the association, its property manager, and any past, present, or future director or officer.
The policy also contained Exclusion 9, a standard insured-versus-insured exclusion, which barred payment for any claim against an insured that was brought by or on behalf of another insured. RSUI denied coverage, filed a declaratory judgment action in federal court, and moved for judgment on the pleadings.
Why the Court Held the Insured-Versus-Insured Exclusion Barred Coverage
The association and its co-defendants raised three arguments against Exclusion 9. The court rejected each of them and granted RSUI’s motion.
1. A former board president is still an “Insured”
Because the policy defined “Insured” to include past officers, the court concluded that Swiatek, as the association’s former president, was an insured. The defendants argued that the two land trusts were separate, uninsured plaintiffs, thereby taking the lawsuit outside the exclusion. The court disagreed. The underlying complaint showed only one plaintiff, Swiatek, suing individually and as trustee. Relying on Miller v. St. Paul Mercury Insurance Co., 683 F.3d 871 (7th Cir. 2012), the court held that suing as a trustee did not change Swiatek’s status as an insured.
2. The Illinois Condominium Property Act does not override the exclusion
The defendants next argued that Exclusion 9 violated Illinois public policy. They relied on three provisions of the Illinois Condominium Property Act: Section 12(a)(3)(D), which requires boards to obtain D&O coverage; Section 18(b)(2), which requires one class of membership; and Section 18.4, which requires board members to act as fiduciaries of the unit owners. Together, the defendants argued, these provisions require a D&O insurer to cover claims by any unit owner.
Citing Royal Glen Condominium Ass’n v. S.T. Neswold & Associates, Inc., 18 N.E.3d 137 (Ill. App. Ct. 2014), and Hopkins v. State Farm Fire & Casualty Co., 2019 IL App (5th) 180285-U, the court explained that the Act imposes insurance obligations on associations and their boards, not on insurers. In other words, the Act requires the board to buy D&O insurance, but it does not dictate the terms of the policy it buys.
3. The exclusion eliminates the duty to defend, not just the duty to indemnify
Finally, the defendants argued that Exclusion 9 only barred indemnity because it stated that RSUI would not be liable “to make any payment for Loss.” The court rejected this argument because the policy required RSUI to defend claims “for which coverage applies.” Because Exclusion 9 prevented coverage from applying, RSUI had nothing to defend. The court entered a declaratory judgment that RSUI owed no duty to defend or indemnify any of the defendants in Swiatek’s lawsuit.
When Illinois Condo and HOA Boards Encounter Insured-Versus-Insured Claims
Insured-versus-insured exclusions often come into play in the following situations:
- Reimbursement disputes with former board members. As in Fireside Terrace, a former officer may claim the association owes reimbursement for expenses he advanced while serving on the board.
- Owner disputes involving a former director. A former board member who later sues over unit access, assessments, or rule enforcement is still likely an “Insured” under the policy.
- Board infighting. Lawsuits between current board members, or between a board member and the rest of the board, frequently fall within the exclusion.
- Suits brought through a trust or entity. Many Illinois units are held in land trusts. As this case shows, a former director suing as trustee may still trigger the exclusion.
Key Takeaways for Illinois Community Associations Reviewing D&O Coverage
- Former board members are often “Insureds.” Many D&O policies define “Insured” to include past directors and officers. A lawsuit from a former board member, even one now suing as a unit owner, may fall squarely within the exclusion.
- Suing in a different capacity may not help. It did not matter that Swiatek also sued as trustee of the land trusts that held title to his units. Associations should not assume a former director’s claim is covered simply because it relates to unit ownership.
- Read the exceptions to the exclusion. Insured-versus-insured exclusions often contain exceptions, sometimes called “carve-backs,” for certain claims. Their scope varies by policy, and boards should review them with their insurance agent at each renewal.
- The Illinois Condominium Property Act will not rewrite a policy. The Act requires boards to carry D&O coverage, but it does not control what an insurer must cover.
- Plan for uninsured defense costs. If a former board member sues, the association may have to fund its own defense. Boards should factor that risk into budgeting and settlement decisions.
Conclusion
A D&O policy is one of the most important protections for an Illinois condominium association and its volunteer board members. However, the court’s decision in Fireside Terrace makes clear that an insured-versus-insured exclusion can eliminate both defense and indemnity coverage when a former officer or director sues, even when that person also sues as trustee of the trust that owns the unit. Illinois community associations should review their D&O policies, including the definition of “Insured” and any exceptions to the insured-versus-insured exclusion, before a claim is filed rather than after.
The experienced Illinois community association attorneys at Hirzel Law, PLC counsel Illinois community associations on insurance coverage, governing documents, and litigation, and can help boards defend their associations in disputes with current and former board members. Contact Hirzel Law to have your association’s D&O policy reviewed before a claim arises.
