Legal Bills Swayed Palin, Official Says - NYTimes.com: "Lt. Gov. Sean Parnell of Alaska said Sunday that Gov. Sarah Palin’s decision to resign was largely prompted by the personal legal costs of the ethics investigations against her."
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Think about that. Palin may have given up her political career, at least for the foreseeable future, because of the costs of legal defense. Now imagine that you are a homeowner in a CID. You have to pay your own lawyer. The association draws on the resources of all the owners. This imbalance in legal representation is one of the main sources of association power.
9 comments:
The same imbalance exists in de jure local government. Those who want to take on city/town hall must pay for their own representation or go in pro per.
The difference is in private local government there are no constitutional checks and balances on the exercise of the HOA's powers even though they are arguably governmental in nature. Plus there's a great potential for abuse by HOA management and counsel to engage in wasteful, frivolous litigation due to the realtively weak governance culture of HOAs compared to municipalities and towns.
I agree with Dr. McKenzie's comments about attorneys being a strong factor in the imbalance of power between owners associations and members.
After much discussion with attorney friends, I wrote wrote a short discussion on the subject, Should a Legal Opinion be Believed?. One of my conclusions is that association members too often accept the legal opinion of the association's attorney without question or inquiry.
To add further imbalance, in many states the CID industry has been successful at creating and maintaining statutes that provide a one way award of attorney fees. The homeowner has to pay the HOA attorney fees, if the HOA prevails but the HOA doesn't pay the homeowner if the homeowner prevails. One such example is Texas Property Code 5.006. Similar examples exist in other states.
Guess which organization of HOA management companies and HOA attorneys consistently lobbies for one-way attorney fees.
The HOA's resources aren't limited to its members. In the event that the homeowner sues or counterclaims, it triggers an insurance policy to fuel the HOA attorney. There is no such similar insurance for homeowners.
"The HOA's resources aren't limited to its members. In the event that the homeowner sues or counterclaims, it triggers an insurance policy to fuel the HOA attorney. There is no such similar insurance for homeowners."
It depends on the nature of the claim. Insurance is generally not designed to function as a prepaid legal services contract covering any and all legal claims. Rather its purpose is to cover the cost of unexpected claims alleging property damage or tort liability against the HOA and/or its directors and officers. Too many folks in these and other forums automatically assume insurance covers everything. It does not; only named perils and those not specifically excluded are covered.
There is no cottage industry of city attorneys filing frivolous lawsuits against citizens so they can collect attorney fees.
I don't think you've seen enough city attorneys in action. Some of the contracted ones are pretty scary from that standpoint.
Fred,
In Texas when you counterclaim against the HOA or initiate suit against the HOA, I have yet to see a case where the HOA insurance policy did not include or pay for a "duty to defend". Even in a declaratory judgment action the insurance pays.
Unlike any other insured, the HOA (and therefore the insurance company) can look to the homeowner's homes as security for payment if the HOA prevails. The homeowner is in essence forced into a poker game against the bank. Most homeowners have no choice but to fold very early and the "cost" is that they have to pay the CAI HOA attorney's fees off-the-books of the HOA.
Apparently the HOA insurance companies are aware of this because they fund HOA abuse all the time. Even when the insurance contract provides an "out" for coverage due to board member's falsification of records or perjury, the insurance seems to still pay and there is no shortage of Board member perjury. After a while you have to wonder what role the insurer and HOA attorney play in that arena in order to effectuate an outcome most desirable for the HOA attorney and insurance company. Even more appalling, the insurance sold by the management company covers the management company as well so you have to wonder about the management's company's conflicts as well.
"In Texas when you counterclaim against the HOA or initiate suit against the HOA, I have yet to see a case where the HOA insurance policy did not include or pay for a "duty to defend". Even in a declaratory judgment action the insurance pays."
Apparently these are very broad form policies and/or Texas law has a high standard in terms of insurers duty to defend, which is triggered when a covered claim (i.e. for tort liability/D&O/property damage is made.
Also, insurers are not noted for being generous with coverage terms and conditions and if they are in fact paying to defend any and all claims against HOAs -- even those not alleging tort or property money damages -- then you can be sure those increased defense costs will eventually be passed along to HOAs in the form of higher premiums.
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