Litigation Costs By Who

Started by GregoryT1 • 7 replies • 159 views

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GregoryT1
Posts: 315

Posted:

I decided to open a new thread. I looked at older threads on this topic.

Recent thread Dean mentioned the insurance company paying the costs of litigation. I was not aware of that possibility.

Lawsuit happens Unit owner 245 sues the condo assn. The condo assn insurance company is now on the hook after the deductible is met to pay for the defense for the condo assn?

What happens if Unit owner 245 fails to pay for something $10,000 on back special assessments. Condo assn needs to recoup and it goes down the litigation path. Is that special assessments for litigation paid by owners included unit 245 and insurance company not involved?

End of the day I know depending on who wins is who pays. So unit 245 wins in both cases the condo reimburses them for their legal costs. If the condo assn wins unit 245 pays the condo assn legal fees. I think that was stated in my docs.

I just did not know that the insurance company can be part of this. Anyone has gone through this scenario. I will have to look through my policy and is it by policy?

Thanks and please respond if what I wrote was a bit confusing. I am not going through any litigation but I was surprised that the insurance company can be involved.

TimB4 (Tennessee)
Posts: 21,059

Posted:

My insurance agent explained this to me. There are two types of coverage amounts: inclusive and exclusive (you would have to read your policy or ask your agent to determine which one you have).

Inclusive coverage will deduct the amount of legal expense from the policy amount.
An example would be:

1 million dollar policy of inclusive insurance.
Legal case goes to court. Legal costs are $500,000
Association loses and is told to pay $750,000 in damages.
Break down of payment:

$500,000 legal fees - paid by insurance
$500,000 of judgement paid by remaining amount of insurance
$259,000 of judgement paid by Association

Same case with exclusive insurance:
$500,000 legal fees paid by insurance
$750,000 judgement paid from million dollar policy.
$0 paid by Association.

Now, insurance companies know how much any specific legal case might cost. This is why they often try to settle - it's less expensive than a full legal case.

Keep in mind, claims may or may not cause your insurance premiums to increase - so there is always the possibility of long term expense to any Association with court cases.

SheliaH (Indiana)
Posts: 6,964

Posted:

You need to read the policy - if you're on the board, ALL board members should have a general idea as to what's in it, amount of the deductible, etc. Depending on whats covered, your insurance would take care of the legal expenses if the association is sued.

That doesn't mean running to the insurance company every time someone screams lawsuit. In this case, the association should be paying its own legal expenses if a homeowner fails to pay assessments, as that's a look legal obligation he or she accepted when the home was purchased in a homeowner association. As part of the lawsuit, the association should ask that legal fees be rewarded to the association if it wins.

If this is an emerging situation, you need to speak to the association attorney about your next steps. It's never a good idea to get legal advice from the internet. We don't live in the same state haven't seen the lawsuit or your policy and most of us aren't attorneys.

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

TerriS6 (California)
Posts: 3,284

Posted:

$10,000. can probably be collected in small claims court. No lawyers allowed.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By TerriS6 on 09/30/2024 4:34 AM
$10,000. can probably be collected in small claims court. No lawyers allowed.

Amounts vary by State.

Although the Association attorney can not represent the Association, some States allow them to be present to offer advice to the board. The Association attorney can also request that the case be moved to a different court where attorneys can represent (the court may or may not grant such a request).

It All varies by State.

TerriS6 (California)
Posts: 3,284

Posted:

Sure. But my point was assessment collections can be done before the amount exceeds the small claims limit. And, spending a small amount on legal advice to prepare a small claims case pales to insignificance alongside the hundreds of thousands of dollars quite often incurred in a superior court case with an appeal.

For example, the LNSU v. Alta Del Mar case could have been won easily in small claims court using the correct argument. Instead, attorneys were hired and the wrong argument was presented in superior court and the case was lost again on appeal. The attorneys' fees were in the hundreds of thousands of dollars. Small claims should have cost a few thousand at most if attorneys were consulted.

DeanJ
Posts: 1,786

Posted:

Quote:

Posted By GregoryT1 on 09/30/2024 3:02 AM
I decided to open a new thread. I looked at older threads on this topic.

Recent thread Dean mentioned the insurance company paying the costs of litigation. I was not aware of that possibility.

Lawsuit happens Unit owner 245 sues the condo assn. The condo assn insurance company is now on the hook after the deductible is met to pay for the defense for the condo assn?

What happens if Unit owner 245 fails to pay for something $10,000 on back special assessments. Condo assn needs to recoup and it goes down the litigation path. Is that special assessments for litigation paid by owners included unit 245 and insurance company not involved?

End of the day I know depending on who wins is who pays. So unit 245 wins in both cases the condo reimburses them for their legal costs. If the condo assn wins unit 245 pays the condo assn legal fees. I think that was stated in my docs.

I just did not know that the insurance company can be part of this. Anyone has gone through this scenario. I will have to look through my policy and is it by policy?

Thanks and please respond if what I wrote was a bit confusing. I am not going through any litigation but I was surprised that the insurance company can be involved.

Maybe I am misunderstanding your post.

First, you have to have directors and officers insurance. This is a separate policy from your liability and structure insurance. This should have been the first thing you determined was in place when you accepted a board position.

If unit 245 fails to pay an assessment, your directors and officers insurance will pay zero for attorney fees involved for collecting this debt.

If the owner of unit 245 sues the board, the HOA or a volunteer, the insurance will hire an attorney and generally pays for all attorney related fees. If the owner of unit 245 prevails in the lawsuit, the insurance will pay for the judgement.

GregoryT1
Posts: 315

Posted:

Thanks everyone for the replies. Lot of research and reading to do on my end.

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