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Subject: Why would a HOA insurer let the HOA run up a huge legal bill instead of paying a small amount in damages?
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JohnS111
(New York)

Posts:165


05/03/2019 5:16 PM  
Let's say that James is having a dispute with his homeowners' association over $3,000.

James has plenty of money and will litigate on principle, so he'll spend $30,000 of his own money on legal fees to win in the dispute.

The HOA also spends $30,000 in legal fees, because it has insurance that covers them.

Yet the amount in dispute is only $3,000.

Why in the world would an insurer allow this, instead of the insurer itself just paying the $3,000 to the HOA?

I am new to dealing with HOA insurance coverage and do not understand this.

Thanks.
RichardP13
(California)

Posts:3781


05/03/2019 5:34 PM  
Sorry, doesn't work that way.

If, the HOA turned the issue right away, then the insurance company would be control their side of the legal expense. If, the association used their legal counsel, then the HOA will be on the hook, not the insurance company.

But, I am sure all these educated Boards knew that.

Been there, Done that
TimB4
(Virginia)

Posts:16414


05/03/2019 5:43 PM  
Insurance companies also litigate on principal.
JohnS111
(New York)

Posts:165


05/03/2019 5:47 PM  
Thanks. The HOA turned the matter over to its insurer immediately. The HOA has been using the insurer's-selected counsel.

I understand that some insurance defense lawyers just run up the bill unnecessarily because they are paid very little per hour and want to make up for that.

But why would an insurer allow $30,000 to be spent on legal fees when the insurer could pay $3,000 to the HOA to cover its loss and be done with this?

It makes no sense to me, from a profit-maximizing perspective. The insurer has wasted $27,000 of its own money.
RichardP13
(California)

Posts:3781


05/03/2019 5:52 PM  
It also might be the other side running up the tab and the insurance is only working on preparation of a defense.

I am currently involved in one of those and the plaintiff is driving the costs. It maybe that the other side's layers want $30,000 of that pie.

Been there, Done that
JohnS111
(New York)

Posts:165


05/03/2019 6:00 PM  
RichardP13, thanks. The plaintiff would settle for a $3k payment and has made that clear. The plaintiff's lawyers just want to be done with it.

Would insurance cover certain things, without limit, but be limited in what it covers? I am not familiar with how HOA insurance works.
MelissaP1
(Alabama)

Posts:8408


05/04/2019 12:32 AM  
A million dollar policy does NOT mean it pays out a million dollars. That is a misnomer. It actually caps out around 80K. (It depends on your policy). That is because of legal costs and other factors. So suing your HOA for a million dollars doesn't get you a million dollar pay off.

A court can ONLY make one "Whole". So if this is a 3K damages case, then the court is most likely only going to give 3K in damages. Who covers legal expenses is determined by the court by request. It may be the court will award the 3K but each party responsible for their own legal costs. So if the HOA spent 30K in legal expenses, then that may be the insurance claim. It's rare the court will make someone pay for the other party's legal expenses.

Keep in mind that if you bring a frivolous lawsuit, then the court can make you pay the HOA's legal expenses. Why? Because if the HOA is forced to hire a lawyer and incur needless legal expenses, that is considered "damages". The HOA would never had needed to experience this expense if it wasn't for the frivolous lawsuit against it.

So not sure why the HOA is already going to their insurer. Maybe they are having them handle the litigation process. It may be a way to limit damages. I've never had our HOA sued. That is because suing your HOA is suing yourself and your neighbors. So if it was ever something worthy of suing over, then would have found a solution way prior to court. Otherwise, I'd let them threaten to sue and tell them I will wait for the paperwork. Being threatened by a lawsuit is just a bunch of BS to me. Not about to be knee jerk reacting or shaking in my boots over a lawsuit. Especially NOT going to run to a lawyer for "advice". Lawyer's are for filing liens/foreclosures for a HOA.

Former HOA President
JohnS111
(New York)

Posts:165


05/04/2019 4:17 AM  
Standard disclaimer: I do not respond to insults, ramblings and other off-topic posts.

Back on topic: if an insurer found out that its customer could settle a dispute for $3,000 instead of running up a $30,000 legal bill, would the insurer require that? In short, does the insurer let its customer and the insurer-picked lawyer run up a $30,000 legal bill because the insurer doesn’t know what’s going on?
SamE2
(New Jersey)

Posts:133


05/04/2019 4:33 AM  
Our HOA was being sued and our insurance company wanted to settle but it was up to the HOA to agree to settle. The insurance company had to keep fighting until the HOA would sign off the settlement. One of the things the HOA was concerned about was if we settled would that open up other units to sue if they saw the HOA as a easy target.
RoyalP


Posts:0


05/04/2019 5:24 AM  
Your HOA may well have been correct.

IMO: 50:50
MelissaP1
(Alabama)

Posts:8408


05/04/2019 6:17 AM  
Does this sound like another lawyer "trick" that since the HOA has "insurance" it's okay to sue? However, that lawyer can't seem to understand the HOA's response is "Hey we don't play that...".

It's as simple as your NOT going to find a way to sue or make an insurance claim to get money from an HOA. You have to have REAL damages and a REAL case. You can't come to court with a whiplash collar on and claim "I fell"...

Former HOA President
MelissaP1
(Alabama)

Posts:8408


05/04/2019 6:45 AM  
Should not have said "trick" as much as a "bully" tactic that lawyers often tell their clients or even the intended sued party. They advise their client that when they want to sue that "Big corporation in the sky" (HOA, GM, Ford...take a corporation pick) that they have "insurance" or unlimited funds covering them. It won't hurt the HOA because they are covered by insurance blah blah blah…

That reality is in a HOA it's ONLY funded by it's members for it's members. A lawsuit right or wrong effects every single member in that HOA. Even the person who is suing. The lawyer gets their money either way so what do they care? In the meantime, the HOA has to spend out money for legal expenses, possible damage payout, higher insurance payments (If they don't drop them) less mortgage offerings, higher refinance rates, and numerous risks. This all from some mad member or hired lawyer "threatening" a court action.

So the HOA going to their insurance instead of paying out a 3K threat? Yes, they should and will go to their carrier. That allows them better protections. It's what insurance does.

My personal opinion and stance is that if someone threatens to sue, I am not going to run out and bow down to it. If your a lawyer you will NOT like that answer and you shouldn't. It means I am NOT stupid nor intimidated by your threats. We now have to play ball in the court of law NOT out of bounds and in the sewer...

Former HOA President
JohnC46
(South Carolina)

Posts:8556


05/04/2019 6:50 AM  
Posted By JohnS111 on 05/03/2019 5:16 PM
Let's say that James is having a dispute with his homeowners' association over $3,000.

James has plenty of money and will litigate on principle, so he'll spend $30,000 of his own money on legal fees to win in the dispute.

The HOA also spends $30,000 in legal fees, because it has insurance that covers them.

Yet the amount in dispute is only $3,000.

Why in the world would an insurer allow this, instead of the insurer itself just paying the $3,000 to the HOA?

I am new to dealing with HOA insurance coverage and do not understand this.

Thanks.




I understand your point but an insurance company cannot willy nilly pay someone. They have to defend themselves even when the defense costs more than paying a claim would.
AugustinD


Posts:1886


05/04/2019 7:40 AM  
Posted By SamE2 on 05/04/2019 4:33 AM
Our HOA was being sued and our insurance company wanted to settle but it was up to the HOA to agree to settle. The insurance company had to keep fighting until the HOA would sign off the settlement. One of the things the HOA was concerned about was if we settled would that open up other units to sue if they saw the HOA as a easy target.



-- My former HOA was in this same situation: A bitter old guy sued the HOA saying that he should not have to pay the assessment on account of the grounds not being maintained to his standard. He had a point about the grounds not being properly maintained. But of course, if a HOA has enough residents feeling this way, then there will not be enough money to maintain the grounds in the first place. The HOA's insurer's low life scummy claims adjuster tried to settle with him, without telling the HOA Board. The Board got wind of this and put a stop to it. The HOA explained that something like $450,000 in back assessments was owed, and if the old buy prevailed every Tom, Dick and Jane would be suing to not have to pay assessments.

-- An important question to ask in general is whether the insurance contract has a hammer clause. This means the insurer gets to decide whether to settle or not.

-- JohnS111, aren't you the poster who said he was an attorney? And you said you have a number of times and won every time? Aren't you costing the HOA a lot of money in billable hours for the regular HOA attorney? It's a common tactic for a HOA (a corporation, after all) to financially exhaust its puny member-opponents and sometimes drive them to move.

-- If the above is true, then the judge is going to start looking at one of the parties cross-eyed for consuming so much taxpayer dollars in court resources.

-- How do you know the HOA has spent $30k? How do you know the insurer has spent $30k?

-- I want to know what the dispute is about.
RichardP13
(California)

Posts:3781


05/04/2019 9:52 AM  
Melissa,

Clearly you have no idea how the legal system works. Maybe a small claim court judgement can only make you whole, but in civil cases the monetary judgement are all over the place.

Case in point, my former boss is suing me for taking one of his accounts four years after I left and one he didn't have while I was there. He received a default judgement of $800K for an account that generates $18K annually. Maybe Melissa, you could explain to me how that makes him whole?
The default got reversed as he tried to pull a fast one on the court.

So far, this has cost my insurance company about $30K to defend. They will settle to be done with. So I have to pay for a wrong that I never committed.

So to tell everyone here that a court can only make one whole, I call BS

Been there, Done that
JohnS111
(New York)

Posts:165


05/04/2019 10:25 AM  
SamE2, thanks. Sounds like the HOA has a policy where it, not the insurer, has control over settlements. That would explain it. Hopefully the HOA is paying a good premium for that.

Others, Melissa from Alabama was called a racist by an African-American poster. I ignore her. I am very much against racism.

Thanks. Sounds like we're done.
MelissaP1
(Alabama)

Posts:8408


05/04/2019 10:40 AM  
I wasn't called that. Another poster was. I never posted a thing about race at all. It's others who do who are always on the losing end of an argument... Proof in point. My words are in black and the space are in white. Which one fills a page? That my friend is as "racist" as I get...

Former HOA President
JohnS111
(New York)

Posts:165


05/04/2019 10:43 AM  
Thanks, everyone. Consider this thread settled; I appreciate the responses (other than from Melissa, who was called a racist and who I ignore).
MelissaP1
(Alabama)

Posts:8408


05/04/2019 10:47 AM  
Again the person brings up racism... He can't get it to stick huh? Cause it isn't true. Sorry not going to fall for that crap. Heck you don't even know I am not African American myself... (Founder of the Black student alliance here...)

Former HOA President
RoyalP


Posts:0


05/04/2019 12:53 PM  
moderator(s):

sorry for the inadvertent hot link under the pic

delete it if you can
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