HOA President Personally Profits from Insurance Policy

Started by DebiB3 • 6 replies • 1037 views

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DebiB3 (Florida)
Posts: 2

Posted:

Can an HOA president hire her family owned insurance company to insure our community?
We are in Sarasota County in Florida.

DonA2 (Arizona)
Posts: 170

Posted:

I wouldn't think she could by herself. But if she recused herself from the vote and the rest of the board approved, then maybe.

DouglasK1 (Florida)
Posts: 2,046

Posted:

You could check your governing documents (CCRs, Deed restrictions, bylaws) to see if they preclude such an arrangement, but don't think most do. I'm not aware of any law that would come into play either but you do some reading to see if you find anything. You can find the Florida statutes with an internet search:
Statute 718 - Condo statute
Statute 720 - HOA stature
Statute 617 - General non-profit corporation statute.

While you might find that it's allowed, it still might not be considered good practice. If I were on the board I would ask that member to abstain from voting due to conflict of interest. The rest of the board might still choose that company. If multiple quotes were acquired and the president's company had the best proposal (best coverage, best rates, etc.), then that might well be the best option for the community. Since it could provide the appearance of impropriety, I would want to make sure to have a written comparison in the minutes showing that.

Escaped former treasurer and director of a self managed association.

DebiB3 (Florida)
Posts: 2

Posted:

Douglas, thank you for the info.
I did find in the Fl State Statute 720.3033 (5) but I am not sure how to interpret it.
If you have time could you read it and give me your opinion?
Thanks

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By DebiB3 on 09/12/2016 12:46 PM
Can an HOA president hire her family owned insurance company to insure our community?

No.

However, the Board could decide and authorize the President to sign an agreement with that company.

Keep in mind that conflicts of interest are not illegal.
They need to be disclosed but they are not illegal.

Decisions of what insurance company or other contractors to use are made by a majority vote of the Board - NOT one individual.
Therefore, if you don't like the decision, blame the entire Board and not one individual.

DouglasK1 (Florida)
Posts: 2,046

Posted:

Quote:

Posted By DebiB3 on 09/12/2016 1:56 PM
Douglas, thank you for the info.
I did find in the Fl State Statute 720.3033 (5) but I am not sure how to interpret it.
If you have time could you read it and give me your opinion?
Thanks

720.3033 (5) has to do with required insurance coverage, 720.3033 (2) appears to deal with conflicts of interest, and also refers to 617.0832. From a quick browse, it appears that as long as the conflict is properly disclosed and 2/3 of the board approves, then the board could use that vendor. I'm not a lawyer and don't have too much time to try to dissect this, but perhaps someone else here might want to take a stab.
From 720.3033 (2): (http://www.leg.state.fl.us/Statutes/index.cfm?App_mode=Display_Statute&URL=0700-0799/0720/0720.html)
(2) If the association enters into a contract or other transaction with any of its directors or a corporation, firm, association that is not an affiliated homeowners’ association, or other entity in which an association director is also a director or officer or is financially interested, the board must:
(a) Comply with the requirements of s. 617.0832.
(b) Enter the disclosures required by s. 617.0832 into the written minutes of the meeting.
(c) Approve the contract or other transaction by an affirmative vote of two-thirds of the directors present.
(d) At the next regular or special meeting of the members, disclose the existence of the contract or other transaction to the members. Upon motion of any member, the contract or transaction shall be brought up for a vote and may be canceled by a majority vote of the members present. If the members cancel the contract, the association is only liable for the reasonable value of goods and services provided up to the time of cancellation and is not liable for any termination fee, liquidated damages, or other penalty for such cancellation.

Link to 617.0832:
http://www.leg.state.fl.us/Statutes/index.cfm?App_mode=Display_Statute&Search_String=&URL=0600-0699/0617/Sections/0617.0832.html

Escaped former treasurer and director of a self managed association.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Quote:

Posted By DebiB3 on 09/12/2016 12:46 PM
Can an HOA president hire her family owned insurance company to insure our community?
We are in Sarasota County in Florida.

The answer is if done properly, an HOA President can hire her family owned insurance company as the association's insurance company.

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