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Legal Liabilities Faced by Homeowners Associations

Directors of HOA organizations have the unenviable task of completing large “to do” lists while assuming the risk of offending neighbors if they don’t like your decisions.  While maintaining the common areas in their neighborhood, directors must:

  • Act in good faith and candor
  • Act in the interests of another and avoid transactions that result in personal gain
  • Not exert undo pressure or act without the knowledge and consent of those he represents

Following these guidelines is protection from legal action against you, but what happens if you are still named individually in a claim against you?  Will the HOA insurance policy cover your legal fees? As long as your actions fall within the parameters of your duties and responsibilities, you are protected. But, if any of your actions are perceived as a breach of those duties, you could end up involved in a legal battle.

It is estimated that HOAs covered 25.1 million American homes and 62.3 million residents in 2011. The good news is that you are in good company. The bad news is that the group of people you serve could end up bringing legal action against you. And the worst part is–they are your neighbors.  So it seems that many people might need to be cautious of more than having their property toilet-papered or egged.  Unfortunately, lawyers are right there with them holding the carton of eggs.

The fact is anyone can sue for anything. But will it stick? Some people are more vulnerable than others. Business professionals, doctors, and property owners are potentially vulnerable to a lawsuit as are HOA directors. Unfortunately, anyone in a position of authority is a target for lawyers.  They see people in authority as someone to go after– someone to bleed dry in many cases.

The most important item you can add to your “to-do” list is to meet with an XINSURANCE underwriter to assess your vulnerability. Review the contractual obligations of your position, the insurance coverage the organization provides, and your plan if a frivolous claim is brought against you.  Being prepared for the future will actually help you when trying to make difficult decisions that benefit your community.

Rick LindseyAuthored by Rick J. Lindsey, President, Chairman, and CEO of XINSURANCE

Rick J. Lindsey hails from Salt Lake City, Utah. He began working in the mailroom of his father’s Salt Lake City insurance firm, getting his introduction to the business that became his lifelong career. Rick J. Lindsey quickly rose through the ranks while working in nearly every imaginable insurance industry job. As an entrepreneur, specialty lines underwriter, claims specialist, risk manager, and a licensed surplus lines broker, Rick J. Lindsey is highly skilled in all levels of leadership and execution. As he progressed on his career path, Rick J. Lindsey discovered an urgent need for insurers willing to write policies for high-risk individuals and businesses. He was frequently frustrated that he could not provide the liability protection these entities desperately needed to safeguard their assets. He also formed the belief that insurance companies acted too quickly to settle frivolous claims. Rick J. Lindsey decided to try a different approach. He started an insurance company and became the newly formed entity’s CEO. This opportunity has enabled Rick J. Lindsey to fill a void in the market and provide a valuable service to businesses, individuals, and insurance agents who write high-risk business. XINSURANCE also specializes in helping individuals and businesses who live a lifestyle or participate in activities that make them difficult for traditional carriers to insure. If you’ve been denied, non-renewed, or canceled coverage, don’t give up quite yet. Chances are XINSURANCE can help.