Liability issues

We have a new board member that every time we want to do something like add playground equipment he shuts it down because he thinks we will get sued and he will loose everything. We as board members or covered for only 1M but he wants it upped to anywhere from 5M to 50M. I am ok with that. We are on the lake and even if a family brings a water trampoline for their kids he makes them take the toys out because he thinks they will sue him and he will lose everything. He wants the owners to go to their attorneys and get documents that show that they take full responsibility. I know we have to make sure that we are covered by insurance but again he is affread to do anything unless we spend money on attorneys because buying insurance is not enough.
We now have families that don’t come out to the condos on the lake because there is nothing for their kids to do, they can only swim for so long. So I guess the question is how careful can you be at what cost. They don’t want Horse Shoe Pits, Volleyball Courts or Darts….let alone kids toys.

The liability insurance covers actions of board members if they cause damage in their duties. It's to make sure the board member's PERSONAL assets are NOT put into jeopardy if they do something wrong. For example: If the board member installs a light post at the front entrance. He doesn't put concrete to set it in by mistake. A member walking their dog wraps their leash around that pole pulling it down on themselve and the dog. Both are injured. The HOA insurance may pick up the bill for the damage. The board member themselve will NOT be personally sued. So they will NOT lose a thing.

Now if that board member decided on their own to put up a light post WITHOUT approval and the same thing happened. It would be that board member PERSONAL responsibility and can NOT hide behind the HOA's insurance.

I would tell your board member to step back and relax a bit. Each time the HOA gets a lawyer involved it costs ALL the members money to do so. It starts a vicious unnecessary circle. Accidents happen. Insurance only covers AFTER they do. Don't worry about what could happen, worry about what to do AFTER it does.

Give back the toys! Post a sign that says: Swim at your own risk. No Horseplay allowed. That should provide enough information for people to watch their kids and no one is officially watching.

Douglas,

Few points and questions...

You mentioned that this boardmember is "new" to the board, should we also assume that he is completely new to having ever been on a board prior? This "fear" he has maybe rooted in ignorance of what/how an HOA board is ran, and it may just be a simple matter of the "seasoned" boardmembers educating him.

Also you mentioned that it is one member, how many others are on your board that one vote can prevent a measure from passing? If he wants to be the "odd man out" based on his assumption/fears there isn't much that you can do - however that does not mean that he stagnates the board's votes.

Directors, Officers Liability Insurance covers board members, committee members, who during the course of transacting official HOA business make a decision. It can be a good or bad decision (though most "good" decisions probably would not result in a claim), and it protects (I like the word segregates) their personal assets from exposure, if a claim/suit is filed. The policy ONLY covers for those mistakes which were NOT deliberate, not made in malice, and where the director/officer simply just "made a mistake." I am not aware of DOL protecting an unlicensed trade boardmember from liability for performing work on behalf of the community. I would state (IMHO) that DOL primarily protects boardmembers from bad decisions, which could result in claim/suit being filed. Most if NOT all work performed on behalf of the community, should be done by a licensed, and insured entity (vendor, contractor, etc).

Liability Insurance for the community protects (in most cases) scenarios which your "new" boardmember is fearful would occur. I would venture to state (IHMO) that even those policies have clauses which would support most laws, where a "reasonable expectation to prevent harm" is afforded. Starting with you insurance carrier, and making an inquiry into what your community's coverage would be, is the best place. He/she can advise you on what limitations your liability insurance (not DOL) support and also I would want to assure that the community's coverage is in-sync with whatever physical elements you have (ponds, lakes, playgrounds, trails, etc). Find out what the additional premiums would be for adding the items you mentioned in your post, to see if your community can support the additional insurance (which I would say while still an expenditure, it is "pennies on the dollar" with regards to the plus benefit of the additional items, AND the additional coverage "please of mind").

Not sure how to address the "new" boardmember "policing" the lake (toys on trampoline) other than educating the boardmember of what roles and responsibilities of being on the board entail. IMO, this is more like "Mr. Wilson" of "Dennis the Menance" fame - and would beg the question of "what does he plan to do if the owners/residents do not comply with his request...?" The common areas are for the enjoyment of every resident/owner, as long as they do so in a manner which is not in violation of the governing documents. Does your community's governing documents state that toys/trampolines, etc are not allowed in the pond/lake areas? Again a good place to start here would be to educate the "new" boardmember on what the documents state, and also what the balance (which I think every boardmember in every HOA has to find), is between protecting the HOA through balanced enforcement, and also allowing the community to enjoy its common areas/elements.

As Jade said general liability is coverage for incidents that take place on common HOA property and or equipment. For example a kid goes swimming in a retention pond and drowns. D&O coverage covers the acts of board members to keep them from being personally sued for performing board functions. There are some exceptions to the D&O coverage, for example intentional disregard for rules. It is a good idea that you get with your insurance agent to see how you can reduce your liability in your community by posting signage, etc. I do agree that 1 million is a small amount, but 50 million is way overboard. I think 2-5 million depending on your amenities is sufficient.

Anyone consider contacting a professional and discussing the risk exposure with Commercial Lines Agent that currently carries their liability insurance?

Hi Douglas:

It might be very worthwhile to invite the HOA's insurance agent to make a presentation to the board, to explain the current coverage, answer questions, and explain what additional coverage is available.

If your insurnace company does not offer coverage for some issues related to the lake, you might be able to get some additional coverage from a different company to cover particular liabilities.

J. Patrick Moore, CMCA