A Requirement Most Boards Already Meet and Rarely Discuss
Every Ontario condominium corporation is required to carry insurance for its directors and officers, as long as that insurance is reasonably available. It is written into the Condominium Act, 1998 as section 39.
It rarely comes up when the board is deciding who guards the building, and the Act never mentions security vendors. Our reading, and it is a reading rather than statute, is that the standard of conduct in section 37 applies to every board decision, including that one. This piece walks through what the Act actually says, as consolidated on e-Laws and current to September 29, 2026, and what it suggests a board should keep on file.
What Sections 37, 38 and 39 Say
Section 37(1) sets the duty. Every director and officer must act honestly and in good faith, and must exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.
Section 38 allows a corporation's by-laws to indemnify directors and officers against liability and costs arising from the execution of their duties. It does not allow indemnity where a person is adjudged to have breached the duty to act honestly and in good faith.
Section 39 is the requirement. If the insurance is reasonably available, the corporation shall purchase and maintain insurance for the benefit of a director or officer against the matters in section 38(1). It excludes the same thing: liability that results from a breach of the duty to act honestly and in good faith.
Two things are worth noting. The carve-out in section 39 concerns honesty and good faith, not the care standard in section 37(1)(b). And section 39 is a floor: it requires the insurance to exist, but the policy's own wording decides what it actually covers, including its exclusions. Read yours, or ask your broker to walk you through it.
Where a Security Decision Fits
Choosing a security company, renewing its contract and acting on what it reports are ordinary board decisions. In our reading they sit under section 37(1) the same way a decision about a roof, a reserve fund study or a management contract does.
The Act does not say a board is exposed because of its security contract, and nothing here suggests claims are common. The point is narrower. If a decision is ever questioned, the question will be whether the directors acted as a reasonably prudent person would in comparable circumstances. Boards answer that with records: what they asked for, what they compared, what they were told and what they did next.
The Reliance Provision
Section 37(3) gives directors a defence that is easy to overlook. A director is not found liable for a breach of the duty in section 37(1) if the breach arises from relying in good faith on certain sources. Those are financial statements that the auditor (in a written report), an officer or a condominium manager represents as presenting fairly the corporation's financial position, or a report or opinion of a lawyer, public accountant, engineer, appraiser or other person whose profession lends credibility to it.
Whether anything a security vendor provides falls into that group is a legal question, and we are not the right people to answer it, least of all about our own records. Put it to your own lawyer. The practical point behind the provision doesn't depend on the answer: relying in good faith is easier to demonstrate when something is written down.
What a Board Can Keep on File
None of the following costs much, and all of it is useful regardless of how the section 37(3) question is answered.
The policy summary. Ask your property manager or broker for a summary of the directors' and officers' policy: who is insured, the limit, and the renewal date. Confirm that it exists rather than assuming.
The decision, in the minutes. Record what was compared, who reviewed it and why the board chose as it did. A result without a reason is the weakest version of the record.
Dated verification. Keep the vendor's agency licence number and proof of insurance on file, with the date someone checked them. A licence that was valid when the contract was signed tells you less than one verified last month. Our clause-by-clause contract walkthrough covers what to ask the vendor for.
A named reader for the report. Decide who reads the monthly report and where it appears on the agenda. What a board-ready report looks like covers what to expect in it. If the board defers a recommendation, ask your lawyer how to minute that. Minutes record what a board knew as well as what it did, and owners can generally request them, so the wording deserves a lawyer's eye.
One question for counsel. Ask whether anything your security vendor provides would count as something directors can rely on under section 37(3). It is a short question and the answer is worth having before you need it.
Before You Act on Any of This
This is general information, not legal advice, and the Act is only part of the picture. Your corporation's by-laws, the terms of its own policy and the facts of any specific situation all matter. Your lawyer and your insurance broker are the right people to confirm what applies to you.
If you have a security renewal coming up this quarter, the most useful step is a small one: put the decision and the reasoning in the minutes while it is still fresh. The Condominium Act applies across Ontario, so this holds whether your building is in Toronto, North York, Hamilton or elsewhere in the GTA. Chromium Guard provides concierge and security services to condominium corporations across those areas.