When should the Association disclose potential litigation to the members?

Started by BryonW • 5 replies • 50 views

💬 Join us to post & get advice from 50,000 HOA & Condo leaders.

⚡ Takes 30 seconds

Already a member? Log in

BryonW (Massachusetts)
Posts: 79

Posted:

Hi all - last winter, a tenant who rents a unit at our property slipped and fell on the ice. A few months ago, they hired a lawyer who sent a threatening letter, which we forwarded to our insurer. Our insurer is now in discussions to settle. No lawsuit has yet been filed. We have just received insurance renewal quotes, and our insurer is quoting a ~20% increase in rates (despite there not being any loss actually incurred yet!).

When would you notify unit owners of this situation?

- Back when the demand letter was first received? (we didn't notify at that time - our reasoning was that there was no lawsuit, and, no tangible financial impact yet).
- Now (upon receipt of large insurance increase) - on the reasoning that it is the first tangible financial impact?
- Wait to notify if/when a lawsuit is actually filed?

TimB4 (Virginia)
Posts: 21,019

Posted:

Based on the reason for the potential litigation, I would not mention it because it may (worst case) encourage copycats.

Instead, I would shop insurance rates and see if the 20% increase is still the market rate (as insurance rates have gone up a lot on many)..

If it is the going market rate, you simply say we shopped insurance and this is the best deal.

TimB4 (Virginia)
Posts: 21,019

Posted:

I asked what the typical increase would be for a condo in Mass and AI provided the following:

Condo association master insurance policies in Massachusetts are experiencing typical rate increases of 20% to 40%, driving up monthly condominium association fees across Greater Boston and surrounding regions.

Key Factors Driving Condo Insurance & Costs in 2027

• Master Policy Spikes: Condo association master policies are frequently renewing with 20% to 40% higher premiums due to regional risk, reinsurance costs, and claims history. These increases are passed down to individual owners via rising monthly HOA/condo fees.
• New Fannie Mae & Freddie Mac Rules (January 2027): Stricter federal mortgage eligibility requirements are taking effect, raising baseline reserve funding requirements (from 10% to 15%) and placing tighter scrutiny on master insurance deductibles and special assessments. While not a direct insurance rate hike, underfunded associations may need to raise dues or issue special assessments to meet these guidelines.
• Mass FAIR Plan Watch: For properties on Cape Cod and high-risk areas, the Massachusetts Property Insurance Underwriting Association (MPIUA / MA FAIR Plan) has a rate cap/prohibition scheduled to lift around March 2027, which could lead to further adjustments pending state approval.

ElleN (Idaho)
Posts: 1,419

Posted:

Have you asked the insurer what the reason is for the increase?

The Board can certainly announce at the next board meeting that (1) the current insurer intends to raise insurance rates by some 20%; (2) the Board will shop around; and (3) owners must be prepared for a possible assessment increase. A board member should motion for the appropriate person to shop around to see if the HOA can do better for insurance.

I agree with your reasoning that no tangible impact at present equates to no need to disclose. In fact there may be a duty not to disclose, given this is in settlement talks.

Your board can always ask the HOA attorney. I suspect the HOA attorney will say the board should say nothing for now about the demand letter, and that for now, this is an Executive Session matter.

BryonW (Massachusetts)
Posts: 79

Posted:

Ugh, copycats are an ugly possibility that I hadn't even considered yet.

We have already shopped the insurance - our current broker says that no other insurer is willing to give a quote - and specifically cited the open claim as the reason. A second broker said the same thing. They say that even though the claim has not yet resulted in a payout, they estimate a probability that the claim will pay, and an estimated pay amount, and then they price our account as if the claim was paid out for that amount. The broker says that if the matter is resolved without a payment, then, our account can be "re-rated" to a lower premium.

Overall, seems like both of you are recommending minimizing the disclosure to unit owners. This is good to know - and is the opposite of what I assumed. If this advances to an real lawsuit, isn't there a duty to notify all unit owners of the lawsuit?

ElleN (Idaho)
Posts: 1,419

Posted:

, seems like both of you are recommending minimizing the disclosure to unit owners. This is good to know - and is the opposite of what I assumed.

I will add that I also discourage disclosing speculation to owners. I think the phrase "pending litigation" is rife with speculation. The phrase is easily misunderstood.

If this advances to an real lawsuit, isn't there a duty to notify all unit owners of the lawsuit?

From what I am seeing from HOA attorneys, the answer is "It depends." See for example:

https://nowackhoward.com/hoa-lawsuit-disclosure/

https://www.davis-stirling.com/HOME/R/Reporting-Lawsuits (ultimately saying the board should disclose litigation]

https://beckerlawyers.com/pending-litigation-and-condominium-association-disclosure-obligations-news-press/ has the following observation for Florida Condos:

"Section 718.119(3) of the Condominium Act provides that if the association is involved in any legal action in which it may be exposed to liability in excess of insurance coverage protecting it and the unit owners, the association is required to give reasonable notice to the unit owners and the unit owners have the right to intervene and defend in the lawsuit."

Two other points to remember --

-- People can go online and/or to the county courthouse and look up for themselves, at any time, any litigation where the HOA is a party. This argues for the Board saying as little as possible to owners. At most, the Board perhaps should state something like: "An owner is suing the Board. For legal reasons, the board chooses not to try to interpret facts or the law. Nor does the Board care to speculate. All the board can say is that the HOA is being sued." The Board should not even direct owners to the county courthouse. In no way should the Board try to act as an attorney. Often times owners have a duty to do their own homework.

-- Remember that the HOA has to disclose litigation in the HOA disclosure to buyers and lenders.

🎯 You've read this entire discussion

Join the conversation with 50,000 HOA & Condo Leaders:

✓ Ask follow-up questions
✓ Share your experience
✓ Get expert advice
✓ Access 350,000 discussions

Create Free Account →

⚡ Takes 30 seconds

Already a member? Log in here