Facts: The facts in the case of Forrest v. The Ville St. John Owners’ Association, Inc., No. 2018-CA-0175 (La. Ct. App. Nov. 7, 2018) are straightforward.  In March of 2016 there was a fire.  It damaged common element and the Forrest unit.  The Association had two insurance policies: one for Property and one for Community Association Management Liability Coverage.  The Property policy was issued by Lloyd’s of London. Lloyd’s paid on its policy, for both the common element and unit damages, but the funds were insufficient to repair the common elements and the unit.  So the Association repaired the common elements.

Trial Court: The unit owner, Forrest, filed suit against the Association alleging breach of fiduciary duty and various other claims under state law.  The Association brought a third party complaint against Travelers when it refused to defend the Association on Forrest’s claims.  Traveler’s claimed that the policy included an “unambiguous exclusion precluding coverage for any claim … arising out of … or in any way involving property damage.”  The Trial Court agreed and granted Traveler’s motion for summary judgment.

Appeal: Despite a number of arguments by the Association that the policy did not exclude coverage, including that the quoted language only applied to “construction defects,” that coverage was illusory if Traveler’s position was believed, and that the exclusion was ambiguous, the Appellate Court affirmed the Trial Court’s Decision.

Lesson:  Despite the Association having both property coverage and management liability coverage, they ended up in two lawsuits and insufficient funds to repair the unit.  What was needed was an insurance committee that understood what it was actually buying and what would and would not be covered.  Because they either didn’t understand what they bought or thought that they had enough insurance, they not only had less insurance than needed, they got to spend lots of money defending both the lawsuit by the unit owner and being involved in the suit and appeal against its insurer.  Unfortunately, the phrase penny wise and pound foolish comes to mind.

IMPRESSION: The ruling in Great Am. Ins. Co. v. State Parkway Condo. Ass’n, No. 17-cv-3083 (N.D. Ill. Sept. 11, 2018), should serve as a cautionary tale to Condo and HOA boards.

DETAILS: In Chicago, a unit owner of a condominium located at 1445 North State Street filed an Illinois state discrimination claim in 2007 against the State Parkway Condominium Association (“SPCA”) for failure to accommodate his hearing disability during SPCA Board meetings.  The SPCA defended the claim under its 2006-2007 Non-Profit Management and Organization Liability Insurance Policy (“policy) issued by Travelers Casualty and Surety Company of America (“Travelers”).

A settlement between parties was reached in September 2007; but six months later, the SPCA sued the same unit owner in an entirely unrelated matter. Continue Reading “Related Wrongful Acts” Can Exhaust an Association’s Liability Insurance Policy Limit

Issue:  If your association was destroyed by fire or some other hazard, and it did not make sense to rebuild, how would the funds be divided?

Problem.  Odds are that you don’t know the answer.  The fact that you don’t know should scare you.  Is every unit in your association worth the same amount?   I doubt it.  Do you each pay the same amount in assessments?  Does that control?  What does your declaration say about the distribution of insurance proceeds if the unit owners elect not to rebuild?  Do you understand what it says? Does it even make sense? Continue Reading Why You NEED to Amend Your Association Declaration Insurance Provision Before You Have a Loss