Board Ignores Legal Advice

what if board's attorney gives legal advice about what it needs to address violations by enforcing CC&R's, but the board ignores the advice. What are the implications for the Association if liabilities arise as a result of ignoring the advice? Does it negate general liability insurance coverage? What about directors insurance? Could directors become personally liable?

Our board ignored the advice of the board's attorney numerous times. I brought a lawsuit against
them and the judge dismissed the case and they were covered under the D&O policy.
My understanding was if the board does not follow by-laws they are not covered. That does not prove
to be the case. I have found out that the board can do whatever they want and unless you get the
residents involved, your hands are tied and you are at the mercy of the board.

It's up to the board to decide to enforce or not to enforce a rule. The lawyer just gave advice. It's still up to the board to follow it or not. The lawyer really is there to represent the HOA in court if anything were to happen. The Insurance covers the board members from personally being sued if a decision by the group causes harm. Which is a benefit for some to get involved in their HOA's if their personal assets are protected.

Sounds like there is a specific issue your HOA is dealing with. Would need more details in that issue to know more if your HOA is acting accordingly. Suing your HOA is suing yourself and your neighbors. If there really is an issue, it's best to use the power of majority to make changes. The power to make changes and enforce is all in the CC&R's. Use the power of your documentation to make changes than using outside sources to enforce using your rights you have in a HOA.

what if board's attorney gives legal advice about what it needs to address violations by enforcing CC&R's, but the board ignores the advice. What are the implications for the Association if liabilities arise as a result of ignoring the advice? Does it negate general liability insurance coverage? What about directors insurance? Could directors become personally liable?

Betty, in my opinion it is an open ended - if not a wishy washy - question no one can answer. What if the attorney tells you the pigs fly?

legal advise is not always good advise. I wasn't on the Board at the time, but our lawyer advised we did not need to place a lien on a unit. The bank foreclosed on the unit. Bad advice.
Our lawyer advised a person should not be a Board member because there was a dispute over parking stalls with another Board member. He said it was a conflict of interest. This was when the Vice-President was also our paid manager. I guess the lawyer saw no "conflict of interest" there.

Also years ago, my lawyer after a major accident had me sign a sheent that was not completly typed. I had told the lawyer what I wanted and he just wrote it it. I told the lawyer I wanted $80,0000 because he advised me to ask 7 tmes my to date medical expenses so that future medical expenses would also be covered. When I got to the diposition and the document I had apparently signed was read, it stated I was asking #200,000. That took me by complete surprise and I did not know how to respond. I just stated my lawyer helped me with it or something to that effect.

I even have some disagreement with the lawyer that is currently a Board member.

Also volunteer Board members do have legal protection as long as they act in good faith. I would never have agreed to be on the Board without that legal protection and insurance for Board members.

Also it has been mentioned many times on this forum when you sue the association it is like suing yourself.
If you are not pleased with the current Board members, read your governing documents and follow proper procedure for voting them out of office.

I contacted the HOA insurance company regarding what would and wouldn't be covered " If they are following the by-laws yes there would be coverage if they aren't there would be no coverage I will be real interested to see how it all turns out a lot of info the officers didn't or wouldn't turn over to an attorney representing a homeowner was given to the attorney (by a homeowner).

NO it isn't a "Knee jerk " reaction the suit has been filed mostly because the current officers act like dictators refuse to follow by-laws blame everyone else for problems and DON'T keep the membership informed of any HOA business/shortages etc. (we only have one meeting a year)

Betty,

As a board president in CA, but not a lawyer, let me give attempt to answer your questions as best I can:

Q: What are the implications for the Association if liabilities arise as a result of ignoring the advice?

Frankly, huge. The board's primary liability protection is adhering to legal counsel, then management, then other consultants. Under CA Corporations Code, the board must act in a prudent manner, and -- as part of doing due diligence in carrying out their duties -- can seek "reasonable inquiry" from professions such as management professionals, legal counsel, accountants, contractors, etc. By making "reasonable inquiry" from professionals and acting "in good faith, in a manner the director believes to be in the best interests of the corporation, and with such care, including reasonable inquiry, as an ordinarily prudent person in like circumstances would use under similar circumstances" the Board is largely shielded under CA law. (see URL below for that quote) However, if the board rejects the advice of their legal counsel, they are going out on a limb big time and this would certainly be brought up in any lawsuit. Remember, the board is not required to always make the right decision in all things, but they are responsible legally to make the decision rightly. This includes common sense and "reasonable inquiry." If the board has reasonable doubts about the advice received from counsel, then the best decision, supported by state law, is to do more "reasonable inquiry" by getting a second legal opinion. If the second opinion is in line with the first, then the board would be fools to ignore it. If the second opinion is different, then the board *may* wish to change law firms, but that, too, needs consideration.

Q: Does it negate general liability insurance coverage? What about directors insurance?

I can't speak to your coverage. You should consult your insurance broker/agent with the situation to determine limits on coverage and any requirements therein.

Q: Could directors become personally liable?

In my non-lawyer opinion? Absolutely! By obtaining legal advice the board is admitting that the issue in question is of the nature that it requires professional legal representation/advice. They're saying, "Hey, this is beyond us... better get a lawyer on this." But, by rejecting that advice, they are choosing to go it alone and face the consequences. Getting a second opinion is one thing (and often advisable in large, messy situations), but failing to take the advice of one's attorney is never wise -- for an individual or a board. In my opinion, they acted with due diligence when they sought legal advice, but they acted opposite when they rejected it. I think 6-of-12 jurors could be convinced the same. The liability protection of Ca. Civil Code Sec. 7231 is null when the board fails to act according to the standard of care required therein.

You may want to read: http://www.hoa-law.com/publications/fiduciary-responsibility-of-association-directors.shtml

If someone wants to sue you, they are going to do it. There's NOT alot of "Prevention" involved. Those steps should have been taken and resolved amongst yourselves before the threat of a lawsuit. People don't threaten lawsuits if their issue is being resolved or paid attention to. They sue when it's not being handled properly and ignored.

I am come from a different background than most, so my legal views a bit different than those who don't have any. I did take some legal courses and have a good grasp on how the system works. So it is understandable why HOA's run to their lawyers for advice on issues. It is good for them if it works for them. However, from my point of view, lawyers were only hired to do the job necessary. They are a tool of which the right questions have to be asked and applied. Knowing those right questions and applications is the gray area you must muddle through...