Berding | Weil Community Association ALERT Newsletter
Legal News and Comments for Community Association Boards and Managers Issue #91 • April 2012
What Protects an Individual Homeowner From a Catastrophic Judgment Against Her Community Association?
by Tyler P. Berding, Esq.
There's a lot of media and blog space being devoted to the question of whether the homeowners in the community where Trayvon Martin was killed could end up personally responsible for a judgment obtained against their association and perhaps lose their homes as a result. This tragedy could certainly result in a lawsuit brought against the association by Martin's family. If it were, it could be based in part on the fact that the homeowner's association authorized the “neighborhood watch” program which included the work of George Zimmerman, Martin's alleged assailant. A verdict of negligent supervision resulting in wrongful death could result in a judgment against the association. It has already happened. In March, 2012 a jury in Hawaii awarded $3.89 million in general and punitive damages against an association's board of directors and management for what was termed a violation of condominium laws and a “gross abuse of the board's power.”
The jury found a pattern of intentional abuse in the Hawaii case. Notwithstanding all of the publicity and national attention, the damages in the Trayvon Martin case, assuming a finding of liability against the association, would likely be an award of general damages—a punitive damage award against the association is unlikely on these facts. But the possibility of a damages award in any substantial amount against the association will create concern among owners about their potential individual responsibility. Are the individual owners exposed to personal liability in this or similar scenarios?
We have written previously on this subject and have noted that a bankruptcy filing by a community association would not likely protect owners from an association's judgment creditors. The owners would not usually be parties to the litigation as the corporate status of most community associations would protect them unless they had been personally involved in the incident. But the provisions of most community association governing documents permit the association, under the right circumstances, to “pass through” debts owed to creditors, including judgment creditors, through the vehicle of an assessment lien. Given those possibilities, what can owners do to protect themselves?
Proper Management and Board Oversight
It should go without saying that avoiding negligent or illegal acts in the first place should be high on everyone's list. Properly supervising volunteers, employees and contractors who do work for the association to be sure that they carry out their duties without endangering the safety or lives of others is a paramount responsibility of every manager and board of directors. Insuring proper licensing of tradespeople and professionals is a good place to start. Background investigations and reference checks as well as regular oversight of their activities by management or by the board are a must. Requiring that all contractors be properly insured against claims of negligence brought by third parties who might be injured or damaged is critical.
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