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I recently read about a woman who sued McDonald’s because she spilled scalding hot coffee on her legs. She won over $2.7 million. Or, perhaps you heard about the burglar who hurt himself while breaking into a home and then sued the homeowner? My personal favorite though is about a convicted felon in Virginia who sued himself for causing himself to commit his crimes. In the suit, he claimed he violated his own civil rights and religious beliefs when he allowed himself to get drunk. He demanded $5 million from himself, but because he didn’t have a job in jail he felt that the state should pay. Thank goodness that case was thrown out.
I am convinced that our judicial system is the best in the world, but if people like those mentioned above can drum up such reasons to sue. then certainly any association and its directors can be sued when someone trips and falls in the park or drowns in the pool or is hit by a speeding car in the neighborhood.
Therefore, you, as a director, must do everything you can to make sure you limit your liability and the liability of the association. In fact, you have a fiduciary duty to your association to do so. The first thing you need to do is to make sure the association’s documents contain an indemnification clause. The next thing you must do is to make sure you address any foreseeable dangers and do everything you can to protect the members from those dangers. For example, if speeding is a problem in your community, it may be time to break out the radar gun and start issuing fines. If you have a pool and small children are allowed in that area, make sure that there is either a lifeguard on duty or that every child is supervised by a parent. (Make sure this requirement is posted and is easily visible.) If you have a drinking fountain in your park is leaking, make sure it is fixed so someone doesn’t slip and fall on the wet cement.
In addition, make sure the association has D&O insurance. D&O insurance covers directors and officers. General liability insurance does not protect directors and officers in the same way that D&O insurance does. Next, make sure your association is set up as a nonprofit corporation. Corporations have certain liability benefits that partnerships and other entities do not have. For one, unless you do something horribly wrong, you will not be held personally liable for problems in a corporation, but you may in a partnership.
Several other important steps should be taken to avoid being sued by homeowners. Ask what those are by joining Homeowners Institute by clicking here.
