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Serve But Be Insured

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

One of my practice areas is insurance coverage work. I represent people and help businesses Insurancework out issues with insurance companies regarding whether a particular lawsuit, loss, or claim is covered by insurance. For many people and businesses, insurance is a must and coverage is a matter of everyday life and business practice. Drive a car, get insurance. Own a home, get homeowners insurance. Run a business, purchase a CGL policy. Get business interruption coverage.

A gray area is when we are not quite acting as a person or a business. We are volunteering. We are working selflessly for others. For the common good. Sometimes we are paid. Sometimes we are not. The soccer league, church council, and the HOA cannot get along without us. There are important decisions to be made for the soccer league, for the church, and for the condominium complex.

But those decisions have implications! People are affected by them. People are denied permission to do things. The HOA must act if it has information. If the collective “it” of the HOA knows of a dangerous condition, act it must, as we know. But what if only some of the directors are aware of the dangerous conditions? What if that director or directors do nothing? And what if someone gets hurt?

He gets sued! And he could, in California, be personally liable for not acting on that knowledge. Yes, personally liable, separate and apart from the HOA entity on which board he serves. In a recent post we talked about a case that holds the HOA to the same duty as a landlord. That same case also involved a cause of action within the lawsuit against an individual director for ordering the removal of the installed lights (which were put in to deter criminal activity) and then failing to report the criminal activity to the board. Ordinarily, the law does not make the individual director responsible for the board’s actions. That’s one point of having the board. But when the individual director personally participates in conduct which is a “tort,” he can be joined as a defendant.

So this director was sued. And the lawsuit survived legal challenges. I hope he or the board bought Directors and Officers liability insurance!

Meanwhile, California has enacted some legislation that mitigates against liability for certain classes of directors in these situations. And we’ll discuss them in the next couple of blog posts.

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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