WHat Happens When Tragedy Strikes and Insurance Doesn't Cover it

I'm wondering if anyone can give me examples of what would occur if, God forbid, a tragedy occurred that the HOA insurance carrier will not cover.

I'm specifically thinking of the sad situation that occurred in Raleigh, NC this past April in which a 2 year old toddler gained access to the association swimming pool through a malfunctioning gate the HOA BOD knew was malfunctioning and drowned. Within 5 days his parents had filed a lawsuit. If their insurance policy is like our HOA, malfunctioning gates are exempted from coverage. Juries can award damages to the victim's family in the millions of dollars. So what happens to associations when they've been negligent in maintaining fences and gates thus invalidating their insurance, they lose the lawsuit and now owe a huge sum of money to the victim or family. Assess owners massive assessments? Owners sell to pay?

Yes, owners have to pay up if the Association cannot pay. It's rare but can happen sometimes.

I cannot imagine why you would say Melissa would say that....

2 Options:

1) Special Assessment

2) Association declares Bankruptcy - this typically results in the Association going into receivership (who reports only to the court) and attempts are paid to pay money owed through sale of common area, special assessments, etc.

Option 1 has happened many times in many Associations.

Option 2 has also happened:

Fairfax HOA bankrupted by lawsuit

Florida Condo Association Facing Bankruptcy After Hurricane Repair Goes Awry, Leaving Contractors Unpaid

What Happens When a Homeowners Association Goes Bankrupt

Just wanted to add that may want to review your current insurance to see if it would cover replacement costs. I found our clubhouse was insured for 80K. Today's lumber and building costs would well exceed that to be more like 100K plus. We needed to beef up our insurance coverage or suffer the burden of providing the difference. Considering we already had a 20K deductible. That would have meant atleast 40K to cough up even with insurance.

Another note. Just because you have a 1 Million dollar policy does not mean it pays out 1 Million dollars. That means that will cover the lawyer expenses if the insurance uses one. The pay out will be as small as 80K to the actual person who sues. Another thing may want to look into for payout for lawsuit caps.

You can personally be sued for a loss in a common element I would seriously
ask your homeowners insurance agent to add loss assessment coverage to your policy.

I agree with you on learning how to settle disputes - today, people are less interested in resolving the problem than in being RIGHT and/or stomping their opponent into the dirt. They're right, everyone else is wrong, and life is nothing but a zero sum game (I must always win and you must always lose). No wonder we can't see to get anything done on this planet.

However, I wouldn't accept bullying. I got bullied for a minute while in school and finally hit back (not pretty, but I got my point across and the bully left me alone). Today's bullying isn't like it was 30 years ago or longer - social media has made this extremely vicious and there have been stories of grade school kids committing suicide because their classmates or whoever just kept going and going. It's not easy to stand up for what's right and although you can have a zero-tolerance policy against bullying in the schools, the kids still have to be taught what's acceptable. And the parents need to know this is what the school will and won't tolerate - they can either do their part to reinforce that or take the kid home and teach them . Quiet as it's kept, that didn't work out too well for some families during the lockdown days of the pandemic. Parents found out their little darlings are the reason they don't have nice things, the neighbors give them and the kids the stink eye. and they don't get invited to parties...

Jeann

You must be fun at a party.....not.

Without knowing any specific details, "Within 5 days his parents had filed a lawsuit" makes me wonder if a less than ethical lawyer pounced on this 'opportunity'. Additionally: personal injury attorneys are known to go for the 'deep pockets', ie, they'd sue the HOA, they'd sue the manufacturer of the gate system, they'd sue whoever *installed* the gate system, and anyone else that could be partially responsible.

There's also the question of whether or not the lawsuit is even legitimate: the specific facts and details of the case are going to make a difference.

You mentioned that "Juries can award ..." - two things: 1. I don't know about NC, but some states (Texas, for instance) have enacted legislation to limit awards; and 2. PI attorneys pretty much never want to go to trial - they want a *settlement* (in fact, my sense is that PI attorneys in general consider it something of a FAIL if the case actually goes to trial).

Finally: I've never understood the mechanism behind it, but sometimes insurance companies will actually man-up and pay, even if they don't have to. I mean, "malfunctioning gates are exempted from coverage"? What kind of shitty insurance policy is this? Again, the specific facts and details will make a difference.

If I get a chance, I'll attempt to look up details on the actual incident. IME, the headline story and the real story underneath the headlines are quite often two very different things.

Bill (I am not a lawyer, although I once worked with a large group of PI attorneys)

It's a cost/benefit issue.

General liability coverage would cover negligence.
At the very least, the policy would have to defend the client to not prove negligence.
Hence, it may be less expensive to settle.