How Common Interest Privilege Works

Eric Goidel

Senior Partner, Borah Goldstein Altschuler Nahins & Goidel

What it is.  Common interest privilege is a legal concept that can protect a board member who makes certain statements about others and is drawn into court over them. The privilege is  applicable in situations where a board member may have a moral, legal, or ethical duty to make certain disclosures and the audience that they are communicating to has a right or a need to hear this information. But it does not protect a board member from statements made with actual malice.

When you’re protected. As an example, let’s say board members are interviewing a prospective purchaser. After the interview, the board is discussing the prospect, and someone says something negative about the potential purchaser. If, for some reason, the board was taken to court by the prospective purchaser, so long as the statement does not violate any human rights laws, the statement would be protected by the common interest privilege.  But if the statement was made by a board member to someone who is not part of the cooperative or condominium community, the statement would not be protected by the privilege.

Why this is important. If a board member is sued over a statement which is alleged to be defamatory, the board’s D&O insurance carrier will defend the board member. But dependent upon a variety of considerations, including common interest privilege, a board member may be responsible for damages. If a board member did something in good faith but made a mistake, there will likely be coverage for the mistake. But if the board member committed an intentional act that could have been avoided, the D&O insurance carrier will likely provide a legal defense but not cover an award of damages.