HOA Insurance and lawsuit over unpaid dues - coverage?

Started by JdW • 9 replies • 559 views

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JdW (Texas)
Posts: 40

Posted:

Our HOA is being sued by an owner who claims they paid dues that they haven't in fact paid. Prior to the lawsuit, they refused to give us evidence that they made payments. (I know, it sounds crazy.)

So far the insurance company has been non-committal about defending us under our insurance, as they are still investigating, even though our paperwork is rock solid.

Anyone have experience with a situation like this?

JaredC (Texas)
Posts: 264

Posted:

On what basis is the insurance company dragging their feet? There is an period within which the HOA needs to respond to the lawsuit which is roughly 20-25 days so insurance needs to make a decision quick.

SheliaH (Indiana)
Posts: 6,964

Posted:

This doesn't sound like something you'd bring to your insurance company. If the issue is you say he hasn't paid and he says otherwise, why didn't you turn this over to your association attorney and handle it that way?

You didn't say when all this got started, but there's a chance they've contacted the homeowner's attorney and have begun negotiating. If you've gotten something from the four and you need to respond quickly, you may need to contact your attorney. Sometimes insurance companies respond faster when they get a letter from an attorney. The attorney may need to appear on the association's behalf and request a continuance.

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

PaulJ6
Posts: 990

Posted:

What is the owner suing for- a declaratory judgment or something else- and how much is at stake?

If the owner has done an "accord and satisfaction" then it'll be tough for the HOA to win.

I agree: why run up your insurance premiums by having insurance handle this?

JohnC46 (South Carolina)
Posts: 14,265

Posted:

I say have your lawyer handle the situation and maybe even collect some damages. I o not see this as an insurance issue.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Insurance helps pay out damages that occur in a lawsuit. It can depend on the amount of the award. I can't imagine skipped payments meets the criteria of an insurance claim. The court can ONLY make one "whole". Which means their case the worst case scenario the HOA may have to pay out is their legal fees and money claimed they paid. It's not a pain and suffering type case.

The HOA can file a counter-suit without a lawyer in response. Which can be for about anything that caused damages to the HOA. Like having to seek out legal advice. It may be they owe money for something else.

It's best the HOA just hires a lawyer (not a real estate attorney) to represent them in court and win. No need to go to the insurance unless this was a lawsuit that would max out pay out in damages for the insurance limits. BTW: A million dollar insurance policy only pays out 80K max from insurance. It's NOT a million dollars.

Former HOA President

JdW (Texas)
Posts: 40

Posted:

The amount in question is under $10k.
Both our lawyer and management company (a big one) said we should notify our insurance carrier
to see if they will take the matter on.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

How much is the Insurance deductible? Only reason could think they would take over is if they can minimize the loss. However, 10K is borderline. Seems to me you may want to check with another lawyer. The lawyer should have suggested atleast filing a counter-suit option. The lawyer is there to defend the HOA in the case. The insurance would be there to minimize the damages.

Former HOA President

PaulJ6
Posts: 990

Posted:

Settle it or get the HOA lawyer involved.

It will cost the plaintiff more than $10K to pursue the lawsuit.

This isn't worth running up your insurance premiums.

AugustinD
Posts: 5,144

Posted:

Quote:

Posted By JdW on 02/08/2020 3:46 AM
The amount in question is under $10k.

Has this HOA member actually filed suit in a court of law? Has there been an exchange of correspondence between the HOA member's attorney and the HOA's attorney? Did the HOA repeatedly send notice that such-and-such amount was owed, and did the HOA retain copies of these notices? How did the amount allegedly owed get all the way to $10,000? I would like a full-timeline of events indicating what correspondence was sent when.

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