Page 12 - New England Condominium July 2022

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(617) 988-0633 Contact Attorney Frank Flynn: FRANK@FLYNNLAW-NE.COM Flynn_E4C.qxp:Layout 1 12/8/14 2:30 PM Page 1 12 NEW ENGLAND CONDOMINIUM -JULY 2022 NEWENGLANDCONDO.COM might materially affect the finances of the organization,” and adds that most judg- ments become public record, allowing any- one to find case information if and when it corporation’s or association’s legal counsel reaches that stage. Meanwhile, says Scott Piekarsky, a part- ner in the litigation and real estate depart- ments of the Hackensack, New Jersey office of law firm Phillips Nizer LLP, “Don’t dis- cuss the case with anyone, and don’t ignore an attorney with Stark & Stark in Law- it. Even if a board member is a lawyer, leave renceville, New Jersey. “When you look at it to your \\\\\\\\\\\\\\\[condo, HOA, or co-op’s\\\\\\\\\\\\\\\] counsel. insurance policies—which are contracts— Anything you say can be used against you we learned a long time ago that if there’s the in ensuing litigation. Get professional help. Don’t try to confront the person and try to intimidate them. Go through normal chan- nels. That’s why they exist.” So Sue Me The ‘normal channels,’ according to pros, are to immediately notify both the and its insurance provider. In the case of the latter, coverage may depend on timely and proper notification. “A lawsuit starts even before the com- plaint has been served,” says Chris Florio, potential for a suit, you need to give written or unit owners as a maintenance increase notice to the insurance broker of that po- tential. Policies contain language that state the board chooses to allocate its financial if you don’t give adequate notice for a suit, resources. the carrier may issue a declination of the claim.” Coverage also depends on what type of volved in litigation—not to mention the suit is being brought, and by whom. If a res- ident or contractor is suing the board, for most always preferable to at least attempt to example, the legal defense is normally cov- ered by a Directors & Officers (D&O) pol- icy that the building or community should resolution, or ADR. In ADR, the parties at maintain under its insurance plan. Other odds work with a neutral third to reach a claims against the corporation or associa- tion as a whole—a slip-and-fall, construc- tion defects, and so forth—would likely be ther mediation or arbitration. covered under its general liability policy. Some governing docs contain provisions interchangeably, they’re actually two dif- that indemnify the board for actions taken ferent processes. According to the Ameri- in good faith. This indemnification can be can Arbitration Association (AAA), “Ar- over and above any available D&O liability bitration is the submission of a dispute to insurance. Either way, notification of impending ‘neutrals’) for a final and binding decision, litigation or submission of a claim does known as an ‘award.’ Awards are made in not risk premium escalations, say the ex- perts. What does affect the premium is ing on the parties in the case. Mediation, historic litigation and other risk factors on the other hand, is a process in which an that might be pres- ent in a building or community (e.g., its age, size, location, or amenities such as a pool or a gym). That is, if a co-op, condo, or HOA has been sued a lot—or if a carrier deems lawsuits likely given certain factors— that co-op, condo, or HOA should maintain a more robust often drawn out for longer periods of time policy to protect it adequately, and should and usually result in a win/loss outcome. expect higher premiums. Ultimately, those Mediation typically has a win-win outcome premium costs are borne by the sharehold- ers or unit owners in their monthly carry- ing charges. Some proprietary leases and condo- minium/association bylaws award attor- neys’ fees to the prevailing party called he declaration or bylaws of a condominium upon to defend a lawsuit filed by a tenant- shareholder or unit owner against a board. tration of disputes in which the matter in “Owners are often surprised when they get controversy has either no specific monetary the bill for \\\\\\\\\\\\\\\[the building or community’s\\\\\\\\\\\\\\\] value or a value of $10,000 or less, other legal costs when they threaten to sue,” says than the levying and collection of assess- one manager who prefers to remain anony- mous. “But so many disputes arise from declaration, bylaws, or rules and regula- unawareness of the bylaws in the first place. tions of the condominium association,” per What they should really understand is that the state’s Condominium Act. by suing their building, they’re basically su- ing themselves and their fellow owners.” When there is a damages judgment against the condo, co-op, or HOA, or if the parties choose to settle, the insurer might pay in some circumstances—at least up to limits set in the policy. Of course, this all depends on dotting all the i’s and crossing all the t’s in the first place, and does not ap- ply to acts of fraud, negligence, or decisions made in bad faith. But when there is no coverage, or if the damages exceed policy limits, those costs fall on the shareholders or special assessment, depending on how I Won’t See You in Court Because of the time and expense in- toll it takes on everybody involved—it’s al- defuse potential litigation before it gets to the court stage through alternative dispute mutually agreed upon resolution of the dis- pute. This can be accomplished through ei- While sometimes those terms are used one or more impartial persons (known as writing and are generally final and bind- impartial third party fa- cilitates communica- tion and negotiation and promotes voluntary decision-making by the parties to the dispute.” “Not all lawsuits are created equal,” explains Phillips. “Ones that cannot be resolved in mediation and end up in court tend to be more damaging, as they are that both parties can live with.” Some jurisdictions, such as New Jersey, mandate the use of ADR before a housing- related case can be adjudicated in a court of law. Others, like Illinois, specify that “\\\\\\\\\\\\\\\[t\\\\\\\\\\\\\\\] association may require mediation or arbi- ments, or that arises out of violations of the The Court of Public Opinion Regardless of the outcome of litigation or the path a particular complaint takes, frequent lawsuits are not a good look for any community. Prospective purchasers, or their representative brokers and/or at- torneys, normally look for evidence of past, ongoing, or potential for litigation as part of their due diligence review. As such, says Berkey, “The broker community becomes aware of buildings that are often sued, or that have judgments against them. In such cases, potential purchasers usually will stay “Ongoing litigation can be very taxing on all parties, and can have a multitude of negative impacts.” — Alison Phillips THE IMPACT OF... continued from page 10