Berding | Weil Community Association ALERT Newsletter
Legal News and Comments for Community Association Boards and Managers Issue #92 • May 2012
Hate Rules Enforcement by your Community Association?
Get with your neighbors and vote it out!
by Tyler P. Berding, Esq.
Read any pundit's blog about homeowner associations and you will see a recurring theme: boards of directors over-zealously enforce the rules. True or not, I'm calling the pundits' bluff: If you don't like rules enforcement by your homeowner's association then round up your neighbors and vote it out. I don't mean dissolve the association entirely, just limit its authority to enforce certain rules and leave that enforcement to the individual owners who care the most. This has two benefits: it leaves certain disputes between individual owners to be resolved just by those owners; and it relieves the board of directors and the association from having to act as a cop.
A community association is an entity created to manage and maintain the property and represents the owners to enforce the restrictions recorded against each lot or unit. This includes architectural and behavioral rules. These are rules about how the individual lots or units can be used—such things as modifying or changing the look of your individual house or lot; what can be parked in your driveway; and behavioral rules that involve such things as noise between adjoining units.
The covenants and restrictions in the CC&Rs are always enforceable by individual owners, and while they may be, they don't necessarily have to be enforced by the association. The community association has been delegated that authority by statute and the governing documents and this delegation of responsibility can be scaled back by an appropriate vote of the owners. If they don't like their homeowners association telling them what they can park in their driveway, what kind of floors they can put in their home, or what flags they can fly on their lawn—the members can take away its authority to do that. As I have said in response to several pundits' tirades against aggressive enforcement—quit complaining. Encourage your neighbors to vote to limit your association's enforcement authority and leave enforcement of deed restrictions to any individual owner who is motivated enough to do it. Why should owners who don't care about such things be forced to subsidize those who do?
Berding|Weil Q&A
by Lucas J. Olona, Esq.
We recently tendered a claim to our insurance carrier after experiencing property damage to our Homeowner Association's common area. The carrier denied the claim without performing any investigation. Does an insurance company have an obligation to investigate claims before it can deny them?
Yes. Once an insurance company receives notice of a claim, numerous requirements are imposed upon it to ensure that a thorough investigation is performed.
First, California law imposes a duty of good faith and fair dealing in every insurance contract. Amongst other things, that duty requires that insurance companies promptly and thoroughly investigate any possible bases that might support the claim, as well as the foundation for any denial of coverage. Notably, an insurance company can be liable for damages in excess of the policy limits where it is found to have breached its duty of good faith and fair dealing.
The Unfair Claims Settlement Practices Act also requires that insurers "adopt and implement reasonable standards for the prompt investigation of claims." Any failure to fully investigate a claim prior to denial would arguably cause an insurance company to be in violation of this statute.
Finally, Insurance Commission Regulations impose time limits and other requirements for claims handling. Any violation of these regulations, including, arguably, a failure to investigate, exposes the insurance company to administrative proceedings and penalties.

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