Conflict of Interest

Started by TeddieL • 6 replies • 1783 views

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TeddieL (Texas)
Posts: 13

Posted:

My HOA is being sued. The HOA's "private counsel" and the lawyers representing the HOA
in the lawsuit, work for the same firm. Or, in other words, the lawyers representing the HOA
in the lawsuit and being paid by the insurance company and the lawyer which we pay to look out
for the HOA's best interest work for the same firm---the largest CAI law firm in Texas.

Is this a conflict on interest?

I ask this because a questionable RoR letter was sent out by the insurance company, and our HOA's
"private counsel" does not seem to care.

JimR24 (Texas)
Posts: 399

Posted:

Ummmm...sounds a bit problematic to me.

I guess, if i were in your shoes, i might consider getting representation from another attorney firm. What do u think?

oljim, in texas

Lovin' life with my honey!
and, President of HOA in Texas

JohnC46 (South Carolina)
Posts: 14,265

Posted:

I am not nor do I play a lawyer.

I see a conflict with both attorneys working/partners in the same law firm. I say one has to go.

An insurer’s Reservation of Rights is an important legal step, particularly in the context of liability insurance. The insurer may provide a defense to the insured, seemingly protecting the insured from the serious liabilities that may result from a civil suit. But, the liability insurer is alerting the insured defendant that insurance may ultimately not cover the resulting liability, or a portion of the liability.

The above just seems to be an insurance company's way of protecting it a$$.

LarryB13 (Arizona)
Posts: 4,099

Posted:

Quote:

Posted By TeddieL on 08/31/2014 3:35 PM
My HOA is being sued. The HOA's "private counsel" and the lawyers representing the HOA
in the lawsuit, work for the same firm. Or, in other words, the lawyers representing the HOA
in the lawsuit and being paid by the insurance company and the lawyer which we pay to look out
for the HOA's best interest work for the same firm---the largest CAI law firm in Texas.

Is this a conflict on interest?

I must be missing something because I do not see a problem. In theory, all the attorneys have a duty to act in the best interest of the association. The client is the HOA, not the insurance company.

Quote:

I ask this because a questionable RoR letter was sent out by the insurance company, and our HOA's
"private counsel" does not seem to care.

Just what do you think he should do? How exactly should he react? He has no control over what the insurance company sends out.

LarryB13 (Arizona)
Posts: 4,099

Posted:

Quote:

Posted By JohnC46 on 08/31/2014 5:56 PM
An insurer’s Reservation of Rights is an important legal step, particularly in the context of liability insurance. The insurer may provide a defense to the insured, seemingly protecting the insured from the serious liabilities that may result from a civil suit. But, the liability insurer is alerting the insured defendant that insurance may ultimately not cover the resulting liability, or a portion of the liability.

An insurer has a greater obligation to defend than to indemnify. An insured party may deliberately cause damage. Even though the insurer will not (and legally cannot) pay for intentional damage, the insurer has an obligation to provide a defense.

NpS (Pennsylvania)
Posts: 4,216

Posted:

1. Representation of Multiple Clients. Lawyers in the same firm can and do work for clients with potentially competing interests. Any law firm of size has a review process for potential conflicts of interest. Generally, if the two clients' positions are that divergent, the firm will farm out representation in a lawsuit to an outside firm. With insurance claims, the interests of the 2 clients are generally aligned, but there may be some differences to watch out for.

2. Representation in the Case. The law firm is working for the insurance company. Your insurance policy probably says that the decisions whether to pursue litigation, settle the case, or decide on a litigation strategy are at the sole discretion of the insurer. If the insurance company decides to settle and you want to litigate, there is probably an option for you to pursue litigation at your own expense. But if you lose, the financial liability is on you.

3. Responsibility of your attorney. She is not working on the case even though her law firm is. Unless you want to be billed for her time, best to let the insurance company and its lawyers do their jobs.

4. The questionable letter. Happens all the time. That's the price you pay when you relinquish your right to defend to the insurance company. They will pursue litigation the way they see fit.

5. Protection of the HOA. Insurance companies are generally very sophisticated. They tend to make sure that all financial liability is addressed and not just the liability that is covered by the insurance policy. However, the lawyers who are handling the case are only looking at the payout. If you have some principle that you want to fight over, they aren't interested. For them, it's strictly a cost/benefit analysis comparing the cost of the payout and the cost to defend.

Sikubali jukumu. Read all posts at your own risk.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Nps and Larry I believe give good advice in this situation. However, I would need a bit more clarity or understanding on the situation....

Who is suing and what for? Is the HOA filing a countersuit? Why does your HOA using two sets of lawyers?

A HOA lawsuit works like an insurance claim for the most part. I think that is where the confusion is here. It is like the HOA was in a "car accident". That is the best analogy I can put into context. The court will find out who fault and responsibilty it is. The lawsuit could be tossed out, each pay their own costs, one party pays ALL legal costs, or one party wins with a damages paid.

When the court decides and if the HOA is responsible, there is a CAP on what the insurance pays out. A million dollar policy does NOT pay out a million dollars. Read your insurance policy. It may turn out with legal costs and all it can be less than 100k. That to be paid out and then the HOA members may have to pay out the difference if that is the case. This in context if your clubhouse burnt down and you all had a 100k vaulue of it but to rebuild it would cost 150K. The HOA members pay the 50K amongst themselves.

Keep in mind, suing you HOA is suing yourself and your neighbors. Which means the member or members suing will have to keep paying their dues and pay any special assessments collected to pay. The court in their agreement would be the only one who can say no to that. Which is doubtful.

The best thing to keep in mind... The court can ONLY MAKE YOU WHOLE. It can not make you a profit. Your HOA is gooc to file a countersuit for its legal costs while your being sued if possible. The HOA lawyet should do this and most likely not the insurance company.

As for the HOA attorney and insurance using same firm? No problem as they are working on the HOA side. It would be an isssue if the one suing was using same firm.

Former HOA President

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