Facts

In 2014, Kato purchased a unit at an association, thereby becoming a member of the association. Kato also joined the board and became its President/Treasurer.  Later that year, Kato’s unit, and two other units in the association were destroyed by fire.  The association collected the insurance proceeds from the loss, but decided not to rebuild.  Kato was the president was president at the time and remained president until 2020.  Three years later the association entered into a “Confidential Settlement Agreement” (“CSA”) with the three units for their fire losses, and as part of that agreement was obligated to pay Kato $30,500.  The payment was to be made in installments and until the last payment was made Kato would:

“maintain all rights detailed in the By-Laws of [the Association]. On the other hand, the Members shall omit any responsibilities related to fees (such as maintenance fees) detailed by the By-Laws of [the Association]. When the settlement amount for each Member [has] been paid in full, the Members shall forfeit all rights and responsibilities[ ] granted by the By-laws, related to the units mentioned in the foregoing.”

Two years later, in 2019, while Kato was still president, the association sued Kato for allegedly stealing “hundreds of thousands of dollars from the Association.”  In January of 2020 Kato was removed as an officer and director of the association.

Six months later, Kato sued the manager, board members, attorney for the association, and the association claiming the officers and directors had breached their fiduciary duties, that the attorney had engaged in deceptive trade practices and seeking an order prohibiting the association from paying the management company or allowing the management company to take any action on behalf of the association.

Two months later, on September 10, 2020, the association tendered to Kato the last of the payments due him under the CSA.  “Kato refused to deposit the check.”
Continue Reading Former Association Member Can’t Sue for Breach of Fiduciary Duty

FACTS

David Jensen, a longtime municipal judge, respected civil servant, and owner of an insurance company embezzled more than $40,000 from his homeowner’s association (HOA) in the last three years.  This is the second case of this nature in Wisconsin that I have seen in the last four years.  How did the HOA discover the thefts?  According to the Lake Geneva Regional News, Jensen had been treasurer of the HOA for 11 years and after his death on February 8, 2020, the new treasurer found a number of financial discrepancies.  The HOA contacted the police, who investigated the facts and after speaking with Jensen’s wife determined that Jensen “acted alone in the thievery.”  Because of Jensen’s death, no criminal charges will be brought.
Continue Reading Director & Officer Theft of Funds–Your Community Association Needs Fidelity Insurance

Summary

The US Court of Appeals for the 4th Circuit held that a subrogation waiver provision in a construction contract barred an association’s insurance company from seeking to recover from an allegedly negligent contractor.

Facts

United National Insurance Company v. Peninsula Roofing Company, Inc.:  Pelican Beach Condominium (“Association”) needed a new roof. The Board, after obtaining specifications from an engineer, entered into a contract with Peninsula Roofing (“Contractor”).  The contract was a standard form AIA contract that is widely used throughout the country.  Peninsula Roofing placed a generator in the Association’s parking garage from which the contractor ran extension lines to power its tools. The generator caught fire and caused about $3 million dollars in property damage.
Continue Reading Association Construction Contracts – What are Risks of that Waiver of Subrogation Term

How much insurance should your HOA or condo carry? Are your directors and officers covered? What happens in the unlikely event of a disaster? Please join Husch Blackwell’s Condominium and HOA Law Team and guest speakers Erica Joyce and Ryan Maloney, as they discuss critical insurance issues every board member, manager and unit owner needs to understand.
Continue Reading Association Academy: Insurance – September 11, 2019

Summary

An insurance company can’t sue a condominium tenant in subrogation, even if they were negligent in starting a fire.

The Facts

The Declaration required the association to “obtain and maintain a … policy of all risk property insurance” for the association.  The Declaration also required the policy to name as insureds the unit owners and their bank mortgage holders (Mortgagees) and that “any insurance maintained by the association shall contain [a] ‘waiver of subrogation’ as to the Units and Mortgagees.”  Finally, the Declaration also prohibited the owners from obtaining fire insurance and required all occupants and tenants to comply with the Declaration.

One of the unit owners leased its commercial unit to the tenants (Defendant). The lease did not specify who would carry fire insurance. 
Continue Reading Insurance Subrogation – Not Against A Condominium Tenant

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. 
Continue Reading Insurance is NOT all the Same-Another Case Proving Why You Need an Insurance Committee

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