Educate me on D&O claims process

Started by IndieS • 18 replies • 1158 views

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IndieS (Colorado)
Posts: 79

Posted:

1) Actual situation: A homeowner has filed several claims against the Board (of which I am a member) through a D&O insurance.
The insurance company has asked whether the Board wants the claims "opened and investigated".

2) Fictitious situation: A person visits me, is invited in, and my dog barks at the visitor and scares him/her.
Visitor files a claim against my homeowner's policy for pain and suffering.
I am asked what happened and the insurance company determines liability.

Why doesn't the insurance company simply investigate the claim in scenario (1)?
If the Board says "yes", and the homeowner does not prevail, there is a possibility of premium increase.
If the Board says "yes", and the homeowner prevails, dues will be used to pay the deductible and there will be a premium increase.
If the Board says "no", the Board members could be sued personally by the homeowner.

Several board members (including myself) feel as though we are damned if we do and damned if we don't.

TIA

TimB4 (Tennessee)
Posts: 21,062

Posted:

Indie,

There are deductibles on insurance claims.

I've never heard of anyone outside the Board making a claim on D&O insurance.

Typically, legal action is first brought against the Board and the Board then files a claim.

If no legal action was filed, I'd respond no.

I have heard of members outside of the board making claims against the Associations liability insurance.

Are you sure you understand the situation and it was a claim against D&O?

IndieS (Colorado)
Posts: 79

Posted:

I am a Board member and I received a call from the insurance company, indicating two claims have been made against the D&O insurance by a homeowner. I have been asked whether the Board wants the claim to be pursued. I have a call in to our agent, but was hoping to receive some perspective on what is going on.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Sounds like a big fat "NO". Could be wrong. Why is the owner even talking to the HOA insurance company? It's not their insurance company to contact. Confused on the situation because they don't file a claim on their behalf. Unless it has something to do with common area and damages.

Like a tree fell onto a house. The HOA maintained/owned that tree. The HOA insurance will most likely just pay for the tree cleanup. The house damage is for that owner to claim. The insurance will then contact the HOA if it's determined the tree was not maintained properly. It's not the owner.

Former HOA President

KerryL1 (California)
Posts: 14,550

Posted:

Have you read your policy lately? Have to confess that I haven't reviewed ours in a while, but I'm pretty sure no Owner can file a claim saying the board didn't meet their fiduciary obligations, or some such.

The other thing is, of course, that you alone cannot speak for your entire board. you'd ll need to meet and vote on the topic. I'd want your agent to meet with you all and explain this.

IndieS (Colorado)
Posts: 79

Posted:

The homeowner is filing a personal injury claim against a Board member for a (nonphysical) incident and for slander.

I have read the policy, but it certainly doesn't cover this particular issue (asking the HOA whether to open the investigation).

MelissaP1 (Alabama)
Posts: 13,836

Posted:

You can't sue an individual HOA board member if what they do is within their HOA board duties. The D&O insurance is there to protect one's personal assets for being touched if sued while acting as a board member.

Now this is a lawsuit situation that member needs to bring against that person as a SEPARATE lawsuit on an individual level. Most likely the court would toss this case out if pursued. They would make this a non-HOA level suit but an individual one if the Board member acted OUTSIDE of their HOA duties.

Basically, if I as a board member called a member because they are behind in dues multiple times the owner may claim "Harassment". They then will threaten or sue the HOA or that Board member. Now the board member is not liable for damages because they were acting as a board member in collecting the dues. Plus they are part of a board that is protected by insurance for their individual assets.

Now if that board member is purposely malicious and it's not been agreed for them to contact the member to pursue the debt, then that board member is not covered by the HOA insurance. It would be an individual issue. The HOA insurance doesn't cover a board member if they are acting outside their duties or in an illegal manner.

This person can NOT claim this on the HOA's insurance. They have to sue. If they choose to sue the board (board member wouldn't be individual), then the insurance would then step in if they won their case. Still the board would have to contact the insurance not that individual.

I would just tell the insurance company NO to the claim. That person needs to pursue this as a lawsuit. Plus if they do sue, then your HOA can always counter-sue them for any legal expenses or other damages. The court will most likely toss the case out for the board overall and tell the person they are suing the wrong person. So I'd tell that board member to lawyer up soon.

Former HOA President

IndieS (Colorado)
Posts: 79

Posted:

Quote:

Posted By MelissaP1 on 11/20/2017 4:51 PM
This person can NOT claim this on the HOA's insurance. They have to sue. If they choose to sue the board (board member wouldn't be individual), then the insurance would then step in if they won their case. Still the board would have to contact the insurance not that individual.

I would just tell the insurance company NO to the claim. That person needs to pursue this as a lawsuit. Plus if they do sue, then your HOA can always counter-sue them for any legal expenses or other damages. The court will most likely toss the case out for the board overall and tell the person they are suing the wrong person. So I'd tell that board member to lawyer up soon.

Thank you Melissa. That makes sense.

PaininyourA
Posts: 215

Posted:

ditto Melissa

gasp...choke...gurgle...arrrgggh

RichardP13 (California)
Posts: 3,868

Posted:

A homeowner can and does file claims against the HOA insurance all the time. Should they, no, it should be handled through the homeowner's agent. The HOA agent should not have filed a claim against the D& O, it should have been against the liability portion.

TimB4 (Tennessee)
Posts: 21,062

Posted:

Quote:

Posted By RichardP13 on 11/20/2017 8:24 PM

The HOA agent should not have filed a claim against the D& O, it should have been against the liability portion.

Sounds like a potential D&O case, liable. Not sure where the personal injury comes from.

I agree with others, tell the insurance company no and tell the member to take the issue to court.

Now that advice is based solely on what you provided, which is very very little.

You may want to seek a legal opinion to see what the risks are to the Association.
The legal opinion would be based on all the information available.
Cost: probably between $300-$1,000 depending on the amount of research required.

RichardP13 (California)
Posts: 3,868

Posted:

Quote:

Posted By TimB4 on 11/20/2017 8:34 PM

Posted By RichardP13 on 11/20/2017 8:24 PM

The HOA agent should not have filed a claim against the D& O, it should have been against the liability portion.

2) Fictitious situation: A person visits me, is invited in, and my dog barks at the visitor and scares him/her.
Visitor files a claim against my homeowner's policy for pain and suffering.
I am asked what happened and the insurance company determines liability.

Exactly how is that a D&O case?

TimB4 (Tennessee)
Posts: 21,062

Posted:

It's not.

I'm completely ignoring that situation.

TimB4 (Tennessee)
Posts: 21,062

Posted:

Also, situation 2 has zero to do with situation 1 (as better described as slander in a clarifying post)

IndieS (Colorado)
Posts: 79

Posted:

I was not inferring that the second example was a D&O claim. I was trying to explain my confusion -- in one case, the aggrieved party goes straight to the insurance and files a claim against my homeowner's policy, and my insurance company interviews me and the other party and determines liability. In the first situation, the aggrieved party must essentially receive "permission" to have the claim processed? I never indicated that these were both D&O claims. I'm trying to understand why, in one case, the insurance company just processes the claim, and in the other, waits until the client (the HOA) tells the insurance company to process the claim. Maybe there is implied consent of the policy holder in the second example (i.e., some admission that the event occurred)?

TimB4 (Tennessee)
Posts: 21,062

Posted:

Two different policies.
Two different processes.

Note: even in situation 2, as you pointed out, the insurance company would ask the policy holder if they should process the claim - i.e. the policy holder is approving/initiating the claim. The insurance company won't start anything without the policy holders approval.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

I don't get why anyone would go straight to anyone else's insurance policy. That's your policy. You make the claim.

When my tree fell onto my neighbors house, the claim was for my neighbor to file on their insurance. It was during the remnants of a hurricane and would be considered "An act of God". However, due to the fact the tree was rotten and I did not maintain the tree, that claim went onto MY insurance. Which his insurance contacted mine to do so. He did not do that directly. (Ironic enough me and him happened to have the SAME agent and Insurance company.) My insurance contacted me and I sent them pictures. They were the ones who determined it was my fault instead of nature.

Your scenario #2 did not show D&O liability situation that would involve a HOA. It would be an individual. The sample should be if the person had encountered your dogs, got frightened, and then injured themselves on your property. The key would be if they were an invited guest or not. Trespassers often take on their own liability unless certain conditions exist. (An unmarked bear trap and they step on it example).

It still a big fat no to the insurance claim. Seems really odd this would be even the approach to the issue in the first place. This is not typical behavior or approach to these types of situations.

Former HOA President

JanetB2 (Colorado)
Posts: 4,219

Posted:

Quote:

Posted By MelissaP1 on 11/20/2017 4:51 PM
You can't sue an individual HOA board member if what they do is within their HOA board duties. The D&O insurance is there to protect one's personal assets for being touched if sued while acting as a board member.

Now this is a lawsuit situation that member needs to bring against that person as a SEPARATE lawsuit on an individual level. Most likely the court would toss this case out if pursued. They would make this a non-HOA level suit but an individual one if the Board member acted OUTSIDE of their HOA duties.

Basically, if I as a board member called a member because they are behind in dues multiple times the owner may claim "Harassment". They then will threaten or sue the HOA or that Board member. Now the board member is not liable for damages because they were acting as a board member in collecting the dues. Plus they are part of a board that is protected by insurance for their individual assets.

Now if that board member is purposely malicious and it's not been agreed for them to contact the member to pursue the debt, then that board member is not covered by the HOA insurance. It would be an individual issue. The HOA insurance doesn't cover a board member if they are acting outside their duties or in an illegal manner.

This person can NOT claim this on the HOA's insurance. They have to sue. If they choose to sue the board (board member wouldn't be individual), then the insurance would then step in if they won their case. Still the board would have to contact the insurance not that individual.

I would just tell the insurance company NO to the claim. That person needs to pursue this as a lawsuit. Plus if they do sue, then your HOA can always counter-sue them for any legal expenses or other damages. The court will most likely toss the case out for the board overall and tell the person they are suing the wrong person. So I'd tell that board member to lawyer up soon.

Well said Melissa!!!

GinaF1 (Florida)
Posts: 7

Posted:

Quote:

Why doesn't the insurance company simply investigate the claim in scenario (1)?
If the Board says "yes", and the homeowner does not prevail, there is a possibility of premium increase.
If the Board says "yes", and the homeowner prevails, dues will be used to pay the deductible and there will be a premium increase.
If the Board says "no", the Board members could be sued personally by the homeowner.

Several board members (including myself) feel as though we are damned if we do and damned if we don't.

TIA

I hate anything dealing with insurance but here is what I THINK. Only reason is because of what my HOA dealt with. But, do you guys have an attorney that you use??? Ask them. But here is my thoughts...

(100 % true story, just name changes)) Homeowner bob is behind on dues. HOA sends his account to attorney for collection and Bob doesn't pay. The attorney, under directions from bod, files to fourclose on Bob's home. Bod, after several months and possibly 2 years, has accumulated significant attorney fees and interest/charges, all allowed by the docs and law or was told it was legal. .

Bob questions fees and other charges on his account and is ignored, told to pay his bills and never told what or why his account is double or triple the amount owed. (He was about 400 behind and before seeking an attorney to defend his case his account ballooned to over 15k in a matter of about 7 months. )

Bod gets that attorney and they file a suite for damages and now the case is a classaction lawsuite. The HOA is being sued and not the board. The board did there duty by acting in the best interest of the community and they relied on advice given to them by the companies they hired to advice them... The attorney and management company.

The individual will not be sued because the law protects them from that. But after this case started to become a circus and became very time consuming and costly, the D&O insurance company took over... This was done automatically and the insurance company appointment of legal counsel is not the attorney that represent the HOA in case.

No matter if the HOA wins or loses ..insurance goes up. If you have an accident in your car, with no fault of your own, insurance still gets involved and yes your premium go up.

For small or routine legal matters, the HOA should have an attorney retained for that. The D&O policy is for "when sh*t hits the fan."

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