HOMEOWNER ASSOCIATIONS AND LAWSUITS AND LIABILITY

Titleholders owning residential deed-restricted units or "single detached dwellings" located in a common interest development, more often than not, also own a fractional interest in the common property owned by the association. Part of this type of ownership means titleholders share in all the liability, including that which may be in excess of any insurance coverage.




The purchase of a home in an association includes the potential liability for damages whether or not they are covered by the association's insurance policy. Contrary to popular belief, insurance coverage does not pay for "everything." However, Civil Code section 1365.9 provides that individual homeowners are not liable for tort damages when they are sued solely because they are tenants-in-common, or have common ownership in, the association property, provided that the association carries the minimum insurance coverage specified in that code section.



Depending on your association's insurance coverage, both the costs of defending the lawsuit and any judgment for liability would be paid but even that can get sticky, with board directors seeking their own coverage and representation in addition to the association policies. Although there is no legal authority for titleholders having to pay such additional costs, in some associations members have been assessed costs related to coverage for individual directors outside the normal insurance protections.



Board members may be defended under the association's insurance coverage, but if their acts were beyond the scope of their authority, those board members may ultimately have to repay the insurer and pay any damages themselves.



Nothing prevents a plaintiff from naming individual owners in the lawsuit as defendants, although doing so could result in the plaintiff having to pay defendants' attorneys fees and costs. Any individual owners who are named as defendants will be responsible for their own attorney fees, probably not reimbursed by the association, unless the association votes to pay for the defense of these individuals.



If the association is found liable and is ordered to pay damages and must assess all owners to meet those payments, a titleholder with "excess assessment" or "loss assessment" insurance coverage may have those payments paid by his individual insurance policy. It is the insurer who decides what is and is not covered.