JenniferK1 (California)
Posts: 1
Posts: 1
Posted:
What effect would a civil judgment against the HOA corp have on the individual owners?
A service of:
Community123.com
Professional websites for HOAs & condos, since 2004
Professional websites for HOAs & condos, since 2004
🎁 1st year FREE for HOATalk members! →
Civil judgment against HOA
Started by JenniferK1 • 12 replies • 5470 views
💬 Join us to post & get advice from 50,000 HOA & Condo leaders.
Create Free Account →
⚡ Takes 30 seconds
Already a member? Log in
JM2 (Oregon)
Posts: 439
Posts: 439
Posted:
Hi Jennifer:
It would depend on the HOA's insurance and the particular judgment. If there was no policy coverage or if the judgment exceeded policy coverage, then it would be up to the owners to pony up the money. Typically, this would involve a special assessment that the board would levy against the homeowners to pay for the excess judgment.
There may be some neat lawyer tricks that would allow the opposing lawyer to go after the homeowners with deep pockets.
It's wise for homeowners to maintain their own insurance with a provision that takes care of any excess judgment that is handed on to the owners if the HOA insurance doesn't cover the total judgment; check with your insurance agent about such coverage.
J. Patrick Moore, CMCA
It would depend on the HOA's insurance and the particular judgment. If there was no policy coverage or if the judgment exceeded policy coverage, then it would be up to the owners to pony up the money. Typically, this would involve a special assessment that the board would levy against the homeowners to pay for the excess judgment.
There may be some neat lawyer tricks that would allow the opposing lawyer to go after the homeowners with deep pockets.
It's wise for homeowners to maintain their own insurance with a provision that takes care of any excess judgment that is handed on to the owners if the HOA insurance doesn't cover the total judgment; check with your insurance agent about such coverage.
J. Patrick Moore, CMCA
MelissaP1 (Alabama)
Posts: 13,836
Posts: 13,836
Posted:
Suing your HOA is suing yourself and your neigbhors. The HOA MUST pay for a lawyer to defend themselves (in most cases) in court. That means the HOA will have to pony up the "retainer" fee for the attorney, hourly rate, court costs, and other possible legal costs. This could be between 2K - 5K depending on the case. These expenses are JUST on the HOA's side alone. That's NOT the individual related costs.
The ONLY money the HOA has is the money collected by it's members. That is the dues money you are responsible to pay each time period. (Monthly, quarterly, yearly etc...) A HOA is ONLY funded by it's members FOR it's members. If the HOA doesn't have enough money or insurance, then the HOA has to raise dues, have a special assessment, or face losing or paying more for their insurance.
Liability Insurance essentially puts a "Cap" on what the amount the insurance company will pay in a lawsuit. Say I sue for 100K but the insurance only will agree to pay 60K, the other 40K is either dismissed by the court in a settlement or the HOA members will have to collect the difference. (40K). Insurance companies use this cap to limit their payout.
Keep in mind, just because you get a "Judgement" from a court of law to pay or have paid the awarded money, it does NOT mean it gets paid. Getting paid in a reasonable time period is almost unheard of. There cases out there that were settled nearly 10 years ago without hardly a penny spent out. So don't assume the money is "immediate".
The best solution for a HOA is to place a lien. A lien is a legal instrument that has more possibility of getting paid eventually. It is still considered a "judgement" but has more teeth in it. With a lien the owner can NOT sell the property until the lien is paid off. A lawsuit "judgement" the person can sell their property and still NOT pay for years. Essentially, a lien keeps the owner at foot and at bay until the money is paid.
The ONLY money the HOA has is the money collected by it's members. That is the dues money you are responsible to pay each time period. (Monthly, quarterly, yearly etc...) A HOA is ONLY funded by it's members FOR it's members. If the HOA doesn't have enough money or insurance, then the HOA has to raise dues, have a special assessment, or face losing or paying more for their insurance.
Liability Insurance essentially puts a "Cap" on what the amount the insurance company will pay in a lawsuit. Say I sue for 100K but the insurance only will agree to pay 60K, the other 40K is either dismissed by the court in a settlement or the HOA members will have to collect the difference. (40K). Insurance companies use this cap to limit their payout.
Keep in mind, just because you get a "Judgement" from a court of law to pay or have paid the awarded money, it does NOT mean it gets paid. Getting paid in a reasonable time period is almost unheard of. There cases out there that were settled nearly 10 years ago without hardly a penny spent out. So don't assume the money is "immediate".
The best solution for a HOA is to place a lien. A lien is a legal instrument that has more possibility of getting paid eventually. It is still considered a "judgement" but has more teeth in it. With a lien the owner can NOT sell the property until the lien is paid off. A lawsuit "judgement" the person can sell their property and still NOT pay for years. Essentially, a lien keeps the owner at foot and at bay until the money is paid.
Former HOA President
BradP (Kansas)
Posts: 2,640
Posts: 2,640
Posted:
Jennifer:
Without knowing details of what is going on I am under the assumption that you are just inquiring about what would happen when an HOA is sued and a judgement is reached. If an HOA has insurance and the insurance agrees to cover it then they would. IF they HOA does not have insurance, or it isn't covered or the judgement is greater than insurance the difference would have to come from the homeowners. Either way the HOA loses with either increased premiums or the homeowners have a special assessment. They are always exceptions to the rule and unless someone is in a situation where the only recourse is legal action I wouldn't advocate a lawsuit against an HOA. With that said each case is unique.
Without knowing details of what is going on I am under the assumption that you are just inquiring about what would happen when an HOA is sued and a judgement is reached. If an HOA has insurance and the insurance agrees to cover it then they would. IF they HOA does not have insurance, or it isn't covered or the judgement is greater than insurance the difference would have to come from the homeowners. Either way the HOA loses with either increased premiums or the homeowners have a special assessment. They are always exceptions to the rule and unless someone is in a situation where the only recourse is legal action I wouldn't advocate a lawsuit against an HOA. With that said each case is unique.
MelissaP1 (Alabama)
Posts: 13,836
Posts: 13,836
Posted:
I forgot to mention that in a prior post it was mentioned about "lawyer tricks" and maybe making "deeper pocket" member pay more. This is NOT possible and could NEVER happen. Any amount the HOA is divided equally amongst EVERY homeowner/member. If you have 50 homeowners and the amount owed is 50K, then each homeowner MUST pay 1K a piece. NOT paying the special assesment can put each owner in jeopardy of being liened for this amount. Most of the time, it's the owner's with "deep pockets" that are just willing to pay the assessment and get it over with more than them paying more out.
If anything, a lawyer could make it so that if your the one that sued, you don't have to pay any special assessment to pay your award. However, that truly is some good lawyering and possible.
It's NEVER a good idea to sue your HOA for monetary reasons. If you do, do it as a "class action" situation and NOT as an individual. HOA's work by majority vote. Ironically, your best chance to win is also if you are a member in "good standing" and stay as a homeowner. If your up to date with your dues, you still have a vote. If you sell your home, your most likely NOT part of the HOA anymore and the lawsuit could be invalid. So be very careful and see if other avenues can be followed.
If anything, a lawyer could make it so that if your the one that sued, you don't have to pay any special assessment to pay your award. However, that truly is some good lawyering and possible.
It's NEVER a good idea to sue your HOA for monetary reasons. If you do, do it as a "class action" situation and NOT as an individual. HOA's work by majority vote. Ironically, your best chance to win is also if you are a member in "good standing" and stay as a homeowner. If your up to date with your dues, you still have a vote. If you sell your home, your most likely NOT part of the HOA anymore and the lawsuit could be invalid. So be very careful and see if other avenues can be followed.
Former HOA President
BradP (Kansas)
Posts: 2,640
Posts: 2,640
Posted:
Melissa:
I will disagree with you on two points, to say it is never advisable to sue your hoa is incorrect. While I don't advocate it there are certainly situations that require it. Let's say for example you turn in a request to put up a fence on your yard and your documents say the board has to respond within 30 days or it is approved by default. Lets say that after 90 days you got no response and tried to follow up on it but got no response and decide to put your fence up. Lets go further to say the HOA hires someone to take it down when you are at work because in their documents they have a provision that says they are allowed to go onto property to correct violations. Would you just eat $5,000+ yourself as a homeowner? I wouldn't...there are circumstances that require litigation unfortunately.
As for not going after the deep pocket owners, again don't think that it can't happen. When someone sues they name people that they think they can get money out of. If there are a couple of millionaires living in your neighborhood there is nothing to prevent them from being personally named when the HOA is sued. I am not a lawyer, but I have heard of this happening. That is why I am poor, if they want half of what I have, that means I am less in debt!
I will disagree with you on two points, to say it is never advisable to sue your hoa is incorrect. While I don't advocate it there are certainly situations that require it. Let's say for example you turn in a request to put up a fence on your yard and your documents say the board has to respond within 30 days or it is approved by default. Lets say that after 90 days you got no response and tried to follow up on it but got no response and decide to put your fence up. Lets go further to say the HOA hires someone to take it down when you are at work because in their documents they have a provision that says they are allowed to go onto property to correct violations. Would you just eat $5,000+ yourself as a homeowner? I wouldn't...there are circumstances that require litigation unfortunately.
As for not going after the deep pocket owners, again don't think that it can't happen. When someone sues they name people that they think they can get money out of. If there are a couple of millionaires living in your neighborhood there is nothing to prevent them from being personally named when the HOA is sued. I am not a lawyer, but I have heard of this happening. That is why I am poor, if they want half of what I have, that means I am less in debt!
JM2 (Oregon)
Posts: 439
Posts: 439
Posted:
Hi Melissa:
A couple of things: first, when you sue your HOA and the HOA has good insurance, then you're essentially suing the insurance company. Sure, the rates will go up, but if you're successful, you get the money. Sometimes it's necessary. It's best if the board reviews insurance from time to time, to make sure that the HOA is adequately covered; best to review it with the HOA's insurance agent. When getting bids on insurance, it may be wise to have an independent review of the competing bids by an outside, neutral party (possibly an agent who isn't bidding, or the Association's lawyer if familiar with insurance) to compare proposed coverages, note any deficiencies on what's proposed, etc. One thing to look at: if the HOA is being sued, does the insurance cover the defense costs up front or only after the case is completed?
The other thing: you can sue anybody and ultimately it's up to a court to determine liability. The lawyers on the forum could probably give you a more correct and/or technical information on this, but this is what I remember from a brief study of the law:
You can put as many people in your lawsuit as you want; just make sure that there is at least one "deep pocket." A term that is used is: jointly and severably liable, which means that everybody is liable (jointly) but you can pick out particular liability to go after (severable).
A couple of things: first, when you sue your HOA and the HOA has good insurance, then you're essentially suing the insurance company. Sure, the rates will go up, but if you're successful, you get the money. Sometimes it's necessary. It's best if the board reviews insurance from time to time, to make sure that the HOA is adequately covered; best to review it with the HOA's insurance agent. When getting bids on insurance, it may be wise to have an independent review of the competing bids by an outside, neutral party (possibly an agent who isn't bidding, or the Association's lawyer if familiar with insurance) to compare proposed coverages, note any deficiencies on what's proposed, etc. One thing to look at: if the HOA is being sued, does the insurance cover the defense costs up front or only after the case is completed?
The other thing: you can sue anybody and ultimately it's up to a court to determine liability. The lawyers on the forum could probably give you a more correct and/or technical information on this, but this is what I remember from a brief study of the law:
You can put as many people in your lawsuit as you want; just make sure that there is at least one "deep pocket." A term that is used is: jointly and severably liable, which means that everybody is liable (jointly) but you can pick out particular liability to go after (severable).
MelissaP1 (Alabama)
Posts: 13,836
Posts: 13,836
Posted:
I have to disagree and say that your NOT suing the HOA's insurance. You are truly suing yourself and your neighbors. It just might make you feel less "guilty" if you think it is ONLY the insurance company getting sued.
The insurance company does cover liability for actions of a board member if they are liable. Say the Board member did work on a light post at the front entrance of the HOA. That light post later fell on a person walking their dog near it. Turns out the board member had NOT put back all the screws into the bottom of the post. The insurance company would most likely cover the damages the board member caused without a suit but paying out on a CLAIM. The victim would have to make a claim against the HOA insurance. That's NOT a lawsuit. It just means the board member wouldn't personally pay anything out of their pocket.
Most "lawsuit" claims made in a HOA is about rules violations. It's NOT a liability issue involving damages. The issues involve things such as the board members not following the rules, holding illegal elections, forcing assessments not approved, NOT seeing HOA records or other NON-Monetary issues.
If lawsuits in a HOA were about money, then insurance companies wouldn't cover them. 95% of the time, it's just people "fighting" their HOA because they don't like the way things are being done.
The insurance company does cover liability for actions of a board member if they are liable. Say the Board member did work on a light post at the front entrance of the HOA. That light post later fell on a person walking their dog near it. Turns out the board member had NOT put back all the screws into the bottom of the post. The insurance company would most likely cover the damages the board member caused without a suit but paying out on a CLAIM. The victim would have to make a claim against the HOA insurance. That's NOT a lawsuit. It just means the board member wouldn't personally pay anything out of their pocket.
Most "lawsuit" claims made in a HOA is about rules violations. It's NOT a liability issue involving damages. The issues involve things such as the board members not following the rules, holding illegal elections, forcing assessments not approved, NOT seeing HOA records or other NON-Monetary issues.
If lawsuits in a HOA were about money, then insurance companies wouldn't cover them. 95% of the time, it's just people "fighting" their HOA because they don't like the way things are being done.
Former HOA President
BradP (Kansas)
Posts: 2,640
Posts: 2,640
Posted:
Melissa:
Ok, in your scenario I am walking my dog and get hit by the light pole. I file a claim against the HOA for medical expenses. But the pole broke my arm and the after effects of the injury force me to quit my job as a surgeon because of the damage to my arm. I am filing a lawsuit against the HOA, all its members and anyone who looked at me wrong for lost income, negligence, etc. The insurance company will laugh at me if I say here is my statement I think I should get 2 million dollars for lost wages, pain and suffering, etc. More than likely you will have to file suite, it may settle out of court, but you will have to file.
Insurance will not cover board members if they acted in a willful manner or had gross negligence. If I intentionally didn't put the bolts back on the lightpole and knew this and told someone I didn't think it was necessary, I bet the insurance company wouldn't cover me.
You are right, most lawsuits are squabble over what I can't do, but they sue the board and that is where D&O coverage comes in handy for board members. A lot of lawsuits have some monetary damages in there, that is where insurance comes in handy if you lose as a board member.
Ok, in your scenario I am walking my dog and get hit by the light pole. I file a claim against the HOA for medical expenses. But the pole broke my arm and the after effects of the injury force me to quit my job as a surgeon because of the damage to my arm. I am filing a lawsuit against the HOA, all its members and anyone who looked at me wrong for lost income, negligence, etc. The insurance company will laugh at me if I say here is my statement I think I should get 2 million dollars for lost wages, pain and suffering, etc. More than likely you will have to file suite, it may settle out of court, but you will have to file.
Insurance will not cover board members if they acted in a willful manner or had gross negligence. If I intentionally didn't put the bolts back on the lightpole and knew this and told someone I didn't think it was necessary, I bet the insurance company wouldn't cover me.
You are right, most lawsuits are squabble over what I can't do, but they sue the board and that is where D&O coverage comes in handy for board members. A lot of lawsuits have some monetary damages in there, that is where insurance comes in handy if you lose as a board member.
MelissaP1 (Alabama)
Posts: 13,836
Posts: 13,836
Posted:
Your "lost income" and other issues are part of your claim against the HOA insurance NOT a separate suit. Each accident a person suffers is investigated by the insurance industry. They figure out what the adequate payoff is for someone who's broken an arm versus a person who's lost a foot. Insurance companies aren't dumb. There are limits on the amounts you can collect. You can sue for any amount you want, but in the end there are limitations and the court will incorporate that.
Lawsuits and insurance claims often "blur". Insurance claims are more for damages or conditions that the insurance policy is written for to cover. Lawsuits cover more things that are NOT covered in the insurance policy but should/could be. You don't necessarily have to "sue" just "claim".
I still recommend you do NOT sue your HOA unless it is because a majority opinion was overruled by a minority opinion. You are better off "suing" or acting in a group than an individual. Vice versa for the HOA suing an individual. HOA's shouldn't sue their members either. That is why there are liens and foreclosures for them to follow.
Lawsuits and insurance claims often "blur". Insurance claims are more for damages or conditions that the insurance policy is written for to cover. Lawsuits cover more things that are NOT covered in the insurance policy but should/could be. You don't necessarily have to "sue" just "claim".
I still recommend you do NOT sue your HOA unless it is because a majority opinion was overruled by a minority opinion. You are better off "suing" or acting in a group than an individual. Vice versa for the HOA suing an individual. HOA's shouldn't sue their members either. That is why there are liens and foreclosures for them to follow.
Former HOA President
JoeW1 (New York)
Posts: 728
Posts: 728
Posted:
MelissaP1 - if the Board acts in a negligent way and a judgment is rendered against them, in theory you are well withing your right to sue. Yes, you will be suing yourself in the process, however the amount garnered will offset the amount you had to pay into the process of the original lawsuit. How is it fair that you are subject to paying legal fees, and the increase in insurance premiums for the Board's stupidity or negligence?
JM2 (Oregon)
Posts: 439
Posts: 439
Posted:
Hi Jennifer:
Again, I respectfully disagree with you. Regarding HOA's suing members, oftentimes it's much better (in addition to filing a lien) to sue in court for back assessments, rather than to try to foreclose on a home. This is particularly true when a homeowner may have a negative equity in their home; foreclosing just guarantees that the HOA does not get its money. Bringing a lawsuit for a judgement against the individual, then going after assets (such as bank accounts, garnishing wages, etc.) is a much more effective way for the HOA to get paid. Also, many in the "HOA industry" want to avoid creating any new anecdotal stories of HOA's foreclosing on "poor innocent homeowners," particularly for an amount of assessments that is a miniscule percentage of the value of the home. Many believe that foreclosure should only be used as a last resort to secure payment to the HOA.
With regard to "suing your HOA," many insurance companies will lowball their settlement offers, and a lawsuit may be the only way to get justice in a case where a homeowner has been offered an inadequate settlement. Look at how insurance companies have responded to Hurricane Katrina claims...both homeowners and HOA's have needed to sue in court to get justice. And, if your claim exceeds the insurance, you may have to sue the HOA in order to get paid the whole amount of the claim.
Obviously, it's better for everybody if the courts and lawyers don't need to get involved, but sometimes it's necessary.
JPM
Again, I respectfully disagree with you. Regarding HOA's suing members, oftentimes it's much better (in addition to filing a lien) to sue in court for back assessments, rather than to try to foreclose on a home. This is particularly true when a homeowner may have a negative equity in their home; foreclosing just guarantees that the HOA does not get its money. Bringing a lawsuit for a judgement against the individual, then going after assets (such as bank accounts, garnishing wages, etc.) is a much more effective way for the HOA to get paid. Also, many in the "HOA industry" want to avoid creating any new anecdotal stories of HOA's foreclosing on "poor innocent homeowners," particularly for an amount of assessments that is a miniscule percentage of the value of the home. Many believe that foreclosure should only be used as a last resort to secure payment to the HOA.
With regard to "suing your HOA," many insurance companies will lowball their settlement offers, and a lawsuit may be the only way to get justice in a case where a homeowner has been offered an inadequate settlement. Look at how insurance companies have responded to Hurricane Katrina claims...both homeowners and HOA's have needed to sue in court to get justice. And, if your claim exceeds the insurance, you may have to sue the HOA in order to get paid the whole amount of the claim.
Obviously, it's better for everybody if the courts and lawyers don't need to get involved, but sometimes it's necessary.
JPM
BradP (Kansas)
Posts: 2,640
Posts: 2,640
Posted:
Melissa:
I highly doubt the insurance company and myself are going to have the same opinion on what my damages are. Their job is to save money. Sometimes you accept their offer because it isn't worth it to fight for a couple extra thousand dollars. Other times it is worth it and therefore a lawsuit must be filed.
I highly doubt the insurance company and myself are going to have the same opinion on what my damages are. Their job is to save money. Sometimes you accept their offer because it isn't worth it to fight for a couple extra thousand dollars. Other times it is worth it and therefore a lawsuit must be filed.
🎯 You've read this entire discussion
Join the conversation with 50,000 HOA & Condo Leaders:
- ✓ Ask follow-up questions
- ✓ Share your experience
- ✓ Get expert advice
- ✓ Access 350,000 discussions
Create Free Account →
⚡ Takes 30 seconds
Already a member? Log in here