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Insurance and Immunity for HOA

By Colin McCarthy, J.D., Robinson & Wood, San Jose, CA

I like insurance law. Not many people do, but I do. But then again, I like heavy metal Metal Concertand not many people like that either. (Their loss. And my hearing loss. I digress). I like insurance law because it feels good to help policyholders obtain insurance coverage, and I am also rewarded when the insurance contract is upheld to enforce the mutual agreement of the parties -- insurance coverage is denied because there was no agreement to cover a particular loss. I work with both policyholders and insurance companies and I see both sides of the equation. Sometimes the law interjects to help or hinder the implications of the insurance contract in real-world situations, such as when a volunteer HOA director participates in negligent conduct that leads to an injury.

In California, the Civil Code has some statutes that protect the volunteer director from the liability scenario we discussed last post. As a refresher, that director participated in conduct that was arguably negligent with respect to known criminal activity and ordered some lights installed in the common area removed. Later, someone got hurt and sued the HOA and that director for removing the lights and leading to a criminal assault. The director was a volunteer but nonetheless was potentially personally liable. Enacted a couple of years after that lawsuit, Civil Code §1365.7 provides some protection for similarly situated directors.

That section provides immunity for a volunteer director of a residential HOA, as long as the HOA maintains certain levels of certain types of insurance. If the HOA manages less than 100 units, there should be $500,000 of coverage for both general liability (i.e., CGL policy for the complex) and also for the directors (i.e., D&O -- Directors and Officers insurance). As long as that insurance is maintained, and the person does not get paid for being a director, he will receive the benefit of this section. He also will have done the tort while in course and scope as a director, done in good faith, and without reckless or intentional conduct. The protections go away if that "volunteer" owns more than two interests in the development.

The net effect of these rules is that the volunteer director will not have to pay anything out of pocket when he otherwise might have had to. See? Insurance is fun!

This blog submission is only for purposes of disseminating information. It does not constitute legal advice. The statements in this blog submission do not necessarily reflect the opinions of Robinson & Wood, Inc. or its clients. No attorney-client relationship is formed by virtue of reading this blog entry or submitting a comment thereto. If you need legal advice, please hire a licensed attorney in your state.

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