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Board gone insane

Started by HappyJ • 11 replies • 2029 views

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HappyJ (Tennessee)
Posts: 21
Posted:
Our board wants the treasurer to take all the reserve funds and give to a management company that WE do not yet have a contract with... They also refuse to acknowledge the contract that they are already in and refuse to give a 30 day notice thus if they sign the new contract they will be financially responsible for 2 management companies and I am sure the first one will sue for breach of contract. Wouldn't this be considered willfull misconduct on behalf of the board? The board consists of 3 members and 2 always vote the same and most of the time just leave the other member in the dark on their decisions.
SusanW1 (Michigan)
Posts: 5,202
Posted:
Please print the MOTIONS that tae board proposed in order to do these actions you talk about.

"Wanting" to do something is not firm or final.

PS - Reserve Funds hava a purpose. Perhaps this new company plans to implement the reserve study, as it is outlined in its schedule.

MelissaP1 (Alabama)
Posts: 13,836
Posted:
Board members can't be sued for acts they do as board members. The insurance of the HOA protects against this. It doesn't sound like anything is in concrete and maybe it was just a brainstorming issue. Make sure it's all in the meeting notes so it can be gone back to later.
Former HOA President
TimB4 (Tennessee)
Posts: 21,047
Posted:
I see the following issues based on what you posted:

1) Giving any management company the right to access (or worse have custody) is, in my opinion, outright crazy. Don't believe me, give me your checkbook and access to your personal savings.

2) The Board doesn't want to acknowledge obligations from past boards

Willful misconduct, I doubt it. Bad decisions, probably.

BradP (Kansas)
Posts: 2,640
Posted:
Quote:
Posted By MelissaP1 on 01/01/2012 2:15 PM
Board members can't be sued for acts they do as board members. The insurance of the HOA protects against this. It doesn't sound like anything is in concrete and maybe it was just a brainstorming issue. Make sure it's all in the meeting notes so it can be gone back to later.

Actually yes they can...you can sue anyone at anytime for anything. If you have D and O insurance it will defend board members if the board acted in a responsible manner. However, if the board does not act in a responsible manner or is wilfully negligent in their acts then insurance will not protect them.
MelissaP1 (Alabama)
Posts: 13,836
Posted:
I mean an individual board member can't be sued when acting as a board member personally. It has to go through the HOA's insurance. That doesn't mean someone can't try to sue a board member. It's just going to toss it out in court if you do.
Former HOA President
JeffR7 (California)
Posts: 251
Posted:
Quote:
Posted By MelissaP1 on 01/02/2012 3:06 PM
I mean an individual board member can't be sued when acting as a board member personally. It has to go through the HOA's insurance. That doesn't mean someone can't try to sue a board member. It's just going to toss it out in court if you do.

That is not a true statement. An individual director can be held personally liable if he/she knowingly commits fraud, does something illegal, commingles non profit and personal funds, acts outside of his/her capacity and his/her actions cause harm.
BradP (Kansas)
Posts: 2,640
Posted:
Quote:
Posted By JeffR7 on 01/02/2012 7:59 PM
Posted By MelissaP1 on 01/02/2012 3:06 PM
I mean an individual board member can't be sued when acting as a board member personally. It has to go through the HOA's insurance. That doesn't mean someone can't try to sue a board member. It's just going to toss it out in court if you do.


That is not a true statement. An individual director can be held personally liable if he/she knowingly commits fraud, does something illegal, commingles non profit and personal funds, acts outside of his/her capacity and his/her actions cause harm.

Jeff is correct, when you get sued as a board member the first step for the lawsuit is your D and O insurance. If the insurance company determines you did something that is against their policy for defending you are on your own.
CarolR11 (Colorado)
Posts: 2,563
Posted:
Brad and Jeff are right. Individual directors certainly can be sued--AND sued successfully.
PatrickS7 (Florida)
Posts: 7
Posted:
A fidelity bond added to your insurance policy will protect the hoa from a corrupt board member or property manager. My guess is the insurance company who issued the fidelity bond can go after the corrupted party, but the hoa will recoup stolen funds through a claim.

FredB4 (Ohio)
Posts: 375
Posted:
It's not a good idea to give a management company access to your reserves. There is no need for them to have access other than the ability to deposit reserve contibutions. They need to receive a copy of the reserve bank statement for accounting purposes.
Reserves are intended for large capital expenses and the board should be transfering money into the operational account only as needed.
LawrenceC1 (Georgia)
Posts: 480
Posted:
Quote:
Posted By MelissaP1 on 01/02/2012 3:06 PM
I mean an individual board member can't be sued when acting as a board member personally. It has to go through the HOA's insurance. That doesn't mean someone can't try to sue a board member. It's just going to toss it out in court if you do.

I can say for experience that the court will not "toss out" a suit against a board member for not going "through the HOA's insurance."

I was sued personally by a homeowner for harassment simply as a result of ordinary and necessary collection activity in my role as Treasurer of the HOA.

The suit went forward. There was a court hearing. Witnesses. Lawyers. Expensive lawyers. In the end, the court agreed and ruled in my favor, but the costs remained.

After all this I fought the insurance carrier of our D&O policy, until they finally agreed to pay my legal costs, less of course the $1,000 deductible.

So any statement about the court tossing anything out, or a board member not being able to be sued because D&O insurance is in place, is simply wrong.

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