Fiile D&O liability claim?

Good afternoon -

I am hoping for some advise on whether to file an insurance claim with our HOA insurance or not. We have rogue HOA BOD's that are selectively following our Bylaws and CP&R's. They are not collecting all dues owed (17 lots with 13 residents) and paying monies out for services not covered under the HOA. They are also allowing residents in arrears to still vote when they are not allowed to do so. Not a large HOA and dues are not huge (now $300/year) but irrespective we have a shared well and gravel road and the monies are for those issues and the small common areas only. No other resident cares what the BOD is doing and so we are odd man/woman out but its possible our HOA D&O endorsement will reimburse our HOA for the funds not collected and funds paid out erroneously. I assume the insurance would then go after the BOD for the money back and our rates will probably go up and our neighbors - especially the BOD - will hate us even more if that's possible. We asked them to follow the documents and they have refused and instead hired counsel (which they didn't need to do) to review the documents and have decided to have a vote to potentially add amendments to essentially make the lack of dues not pursued going forward and the unrelated services paid out "legal". Of course they will not seek the lost dues or reimburse the fund themselves and they still allow members in arrears to vote. So frustrating and afraid we may have a huge assessment at some point in the future for our well (20-25 years old) and we could have had the funds to address it.

Not sure how an owner might file a claim against the HOA board and then ask the HOA insurance to cover any award.

As an owner I doubt you putting a claim in would prove difficult.

And reality is as long as no one else cares how the board operates or what is done with their money your battle will be uphill and lonely.

Sad truth most people today can't be bothered.

Unfortunately your only recourse might be legal action forcing the board to abide by your documents. This will come with a cost to both sides and might also cause some friction with the other do nothing, see nothing, hear nothing, speak nothing owners.

Should everyone pay their fair share? Absolutely!
Should dues be used to maintain and service common property as directed in the By-Laws? Absoulutely!
Should the board be allowed to act as they see fit regardless of fairness, efficiently, and ethical behavior? Absolutely not!

But being right does not guarantee an easy road.

You hit the nail on the head.

We have spoken to 3 different HOA attorney's - including the one that wrote up our original documents - and we can definitely take legal action against the board but it will be money out of our pocket and could easily cost between $10k to $15k or more for us.

Thanks so much for the responses!! It has indeed been an unpleasant experience and I know many have similar and much worse situations. We have pretty much disengaged from the HOA and our neighbors outside of emergency type situations. Luckily most of them are not here most of the time.

We love where we live but extremely disappointed in our neighborhood neighbors. LOL! We have many neighbors we love and adore and they easily make up the difference.

I said UP TO 25%... It depends on the size of your HOA. I budgeted for 10% typically due to turnover rates in our HOA. 25% is admittedly very high but it depends on the HOA situation.

Depending on the neighborhood, the rate of employment in the area, and many other factors, delinquencies can vary greatly.

Therefore, I do not think you can compare apples to apples.

Some Associations can absorb a higher delinquency rate then others.

What is sad about our small neighborhood is that for those that are not paying their full dues the majority have this home as their 2nd home and have more than enough $ to pay their dues. The same goes for the "Winter Watch". Our neighborhood is small and really just has the well, the well house, the gravel road and the common areas (which are very small). The PC&R's and Bylaws addressed our concerns perfectly. We have discovered that the President has been the President for 10 years now and basically doesn't enforce anything. Our HOA in reality doesn't exist but has become a private social club. It is very sad that the apathy of the rest of the neighborhood allow the few to bully and run rogue but we are just one member of the 13.

We filed a claim with State Farm initially but the D&O endorsement was not in place and the claim was denied. The President realized he had put himself and the BOD at risk and added the D&O endorsement and in speaking with the claims department they indicated that it is possible we could make a claim for the dues not collected and the monies paid out for services not provided by the HOA per the governing documents. We have not pursued making the follow up claim as we are exhausted by the whole ordeal and if it does cover same and then pursues recovery from the BOD themselves then we will have even more anger coming our way. (I'm an insurance adjuster by trade and so per my review of the endorsement would appear it should cover but not my call to make). The BOD continues to not enforce the documents and has now also spent a large chunk of our $ to have an attorney review all of our governing documents to possibly change them and in the end are going to have another illegal vote to pass 3 amendments to the Bylaws which will then enable them to "legally" continue as they have been. But of course they will not seek the past dues still owed nor will they assert liens and they will not reimburse for the "Weather Watch" money previously paid out. AND they continue to allow residents in arrears vote. Further they could have already voted and had the amendments to the Bylaws in place before we moved in and did not need an attorney to do so at any time. The Bylaws noted how they could amend them and attorney involvement not required and no filing as in the PC&R's. We consulted 3 different HOA attorneys to confirm our interpretation - including the firm that wrote the original governing documents - and our assessment is correct and we can easily sue the BOD but in the end $ out of our pocket. So - we are on the fence in filing another claim with State Farm - which may or may not cover the "damages" in part or whole. We plan to live here and not move again - no guarantees - but that is partly why we were trying to get the HOA back in the right direction.

Per the attorney's and the insurance "damages" can go back the statute of limitations which are at least 6 years -- so the damages are around $20k plus. We have $25k plus in coverage and around $500 deductible.

Katrina

The fact that you like where you live, you get along with the neighbors, you do not intend on moving, and your dues are only $300 per year all says to me that you are stepping on your own foot. I suggest you either run for the BOD and bring change that way or get over it and enjoy your life.

D&O only covers back to the time they added it on, yes? One or two years, not six?

Per the endorsement it appears that an occurrence would involve the length of time it has been going on -- the statute for the state (TN) would dictate how much time is allowed by law. At least that is my interpretation and it could be wrong - State Farm would interpret and relay the actual time allowed.