Honey, who dropped the insurance coverage?

I am 6 months on our HOA BOD. There has been 80% turn over on BOD due to election and resignations. Main Reason : We are working to through a law suit from last year. Very time / mind consuming with lots of conflict. We have about $15 K invested in lawyer fees and are looking at $10 K in settlement agreement. This represents about 40% of current HOA assets.

We contacted the Insurance Company. OH NO!! The old BOD or old MC let the insurance lapse for the key 6 months last year during onset of the legal issue. There was plenty of money just an oops, and oversight. Along with no liability, there is no Directors and Officers or Errors and Omissions coverage for BOD or HOA.

The New Board is questioning who is responsible and what can we do about it???

Did insurance company contact old MC? Yes.
Did MC contact the BOD? Don't know. No paper work transferred to new board or MC.
What about meeting minutes? No minutes.. All executive session.
What about old Management contracts? Nothing to be found.

Do we pin it on the old MC or old BOD?

Bylaws -Insurance -Insurance policies upon the common properties covering items... shall be purchased by the Board and the Associaiton for .... Such policies and endorsements shall be depositied with and held by the Secretary of the Board.

Bylaws -Liability of D/O- No director or Officer of the Association shall be liable to any member for any decision, action, omission in the course of their duties unless such D/O acted in bad faith or in reckless disregard of the rights of any person or of the terms of the Covenants or these Bylaws.

I talked with insurance agent who told me that if the old board let the coverage drop they loose their protection under the Bylaws?

Has anyone ever seen such a mess?
What do you think we should do?

Your HOA is a mess, join the club.

First, dont waste any energy blaming people and pointing fingers, it doesn't accomplish anything. You have allot of work to do. You need to deal with the issues.

- Grab a phonebook look for a new MC, ask other HOA's in the area, ask realtors, etc.
- MC needs to go. They sound useless. Ask them for a copy of the MC agreement.
- Talk to the old insurance company, get insurance re-instated. Ask them what they need to make it happen?
- Get up to date with the lawyers. See whats happening, do you need to settle?

Good luck.

Sounds like you have many more years of legal fees and not enough money to pay for it.

Lets say it goes to court, how do you see it ending?

Who do you think is going to eat the price of all of this? It IS exactly the homeowners who are going to eating this charge. Most likely going to end up in a special assessment to cover the bill. A HOA is ONLY funded by it's members FOR it's members. The Management company is a CONTRACTOR to the HOA hired to manage the money on their behalf. The management company isn't supposed to do anything without the HOA board's approval.

I also highly doubt that the management's insurance company is going to pay out any money. Their insurance covers them NOT your HOA. It protects the management company from being sued by the HOA. Who is suing who and what for? I am unclear in this area of your post.

The lawyer represents the entire HOA and NOT the individual owners of the HOA. So I would imagine the lawyer would be representing the HOA BOD as it is required a lawyer represents a HOA in a court of law. (unless someone is deemed worthy otherwise). The HOA BOD represents the owners as a WHOLE and not the sum of it's parts. So I would question going through the expense of hiring another lawyer.

More detail is needed because it sounds like a loop that is beginning to grow legs and walk off...

You're not going to like this, but in my opinion the HOA is just out that money. Here is how I see it:

Actually, IMO, the old BOD is responsible since they started this whole thing. D&O insurance protects not only the association and the board as an entity, but it protects the board members personally in the event they are individually and personally sued as a result of their actions and omissions while serving in an official caopacity for the association.

So, if you now sue the old BOD members personally, the old D&O insurance should cover them, but it won't because they let it lapse. Now, chances are your bylaws indemnifies its directors and officers (it's often required) meaning that the association will either purchase insurance to cover its directors and officers, or will itself provide for their defense and any judgement. See what's happening here? If your bylaws have such an indemnity clause, the association is going to have to pay the cost to defend the old BOD members and any judgement. You not only wind up paying yourself, but you've just incurred additional cost to do it!

In short, you'd be going in circles. It's a catch-22.

I doubt you can make the MC pay. It's not their responsibility to renew the D&O insurance. It's the BOD's.

Have you spoken to a lawyer about this?

Hi William:

It is worth checking into and determine if MC can provide information. You have not stated how much was not covered by the insurance. The issue will potentially be that if the MC is at fault and admits they will give over their insurance info. If they would fight in court of law, it possibly may not be worth the cost to association to take such a course of action. What does the HOA attorney think?