HOAs indemnifying (paying for losses of) property managers, lawyers, etc.: standard?

Started by PaulJ6 • 9 replies • 699 views

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PaulJ6
Posts: 990

Posted:

If third-party service providers to homeowners' associations incur losses while performing services for homeowners' associations, is it normal for the HOAs to indemnify them (i.e., pay for their losses)?

Say, for example, a property manager does something while working for the homeowners' association and the property manager gets sued because of what it did. Same for lawyers, landscapers, etc. Is it normal for homeowners' associations to pay them for their losses, even if they did something wrong?

I can see a homeowners' association paying for damages that a service provider incurs if the HOA is at fault, but in cases where the service provider is at fault, is it normal for the HOA to pay for their losses?

Thanks.

RichardP13 (California)
Posts: 3,868

Posted:

What loss would we incur? I am indemnified by the Association.

If my employee steals funds from an HOA, the Association's insurance company covers the HOA loss and the HOA insurance would come have me. I have insurance if my employee does that to someone else.

PaulJ6
Posts: 990

Posted:

Let's say:

1. Someone runs into a landscaper's truck while it's parked, while work is done by the landscaper for the HOA.

2. The property manager's computer dedicated to the HOA is hacked while work is being done for the HOA.

3. The property manager messes up while working for the HOA and gets sued by an owner.

RichardP13 (California)
Posts: 3,868

Posted:

1. Landscaper goes after the driver. The HOA is not involved.
2. My computers are NOT dedicated to any specific HOA. I have no information of value that anyone would want, no SS#'s, no signatures.
3. Hell, I mess up all the time, but never been sued. If I am doing what I am supposed to do and that is working on behalf of the HOA's I represent, then it would be turned over to the association's insurance.

PaulJ6
Posts: 990

Posted:

Thanks- and if your company makes a mistake while working for the HOA and gets sued, would the HOA's insurance typically cover your company? Seems odd that it would.

LetA (Nevada)
Posts: 2,679

Posted:

Quote:

Posted By PaulJ6 on 09/01/2019 3:58 PM
Let's say:

1. Someone runs into a landscaper's truck while it's parked, while work is done by the landscaper for the HOA.

Landscapers auto insurance goes after the at-fault party, the HOA is never involved... EVER!

2. The property manager's computer dedicated to the HOA is hacked while work is being done for the HOA.

The property manager is a vendor just like the aforementioned landscaper; the BOD can go after the MC for damages.

3. The property manager messes up while working for the HOA and gets sued by an owner.
The HOA would be the first name on the blueback, there isn't a remote chance in hades that the MC would solely found at-fault because they are the hired contractor acting on behalf of the HOA.

RichardP13 (California)
Posts: 3,868

Posted:

Quote:

Posted By PaulJ6 on 09/01/2019 5:23 PM
Thanks- and if your company makes a mistake while working for the HOA and gets sued, would the HOA's insurance typically cover your company? Seems odd that it would.

Let's turns the table and say you screwed up while you were supposed to representing the HOA?

PaulJ6
Posts: 990

Posted:

Quote:

Posted By RichardP13 on 09/01/2019 6:36 PM

Let's turns the table and say you screwed up while you were supposed to representing the HOA?

I don't represent HOAs but if I did, and I screwed up, I would not (and probably COULD not) ask the HOA to pay for damages that I incurred. It may be an ethical violation for a lawyer to ask a client to cover the lawyer's losses, regardless of who's at fault.

JZ2 (Florida)
Posts: 52

Posted:

It certainly is normal and customary for HOAs to indemnify property managers who incur liability based upon Association directive.

It is not at all customary for property managers to be indemnified for their OWN negligence or misconduct.

Indemnification duties arise from two independent sources: the state's law and the contractual agreement between the parties.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Our Declaration requires us to maintain a certain level of fidelity insurance. It's based on the amount we have in reserves plus current operating expenses. The Declaration says nothing about responsibility, just at the loss, although the insurance policy may. (Or may not - when I asked our insurance agent about responsibility when we were dealing with a different type of loss, he said that they don't look at who's responsible, just at who is obligated to pay.)

When we changed property management companies, one thing we looked at is the type of coverage they carried and what would happen if one of their employees embezzled funds, for example.

You may get more helpful information if you asked some insurance professionals.

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