Lawsuits are an unfortunate, and expensive, fact of life. It’s been that way ever since the first civil courts in ancient Sumeria, and will be that way as long as there are two parties to dispute something. Chances are, if you live long enough, you’ll be involved in a lawsuit to some degree. And if you serve on a condominium board long enough, chances are good that your board will be named as a defendant in a lawsuit.

In the context of homeowners associations, legal issues can arise between residents and boards, residents and residents, and just about any other way a population can be subdivided. People threaten to sue all the time. People even dare others to drag them to court. (“Don’t like it? Sue me!”) But what exactly does it mean to file a lawsuit? What is the order of operations when a suit is filed? What are some common reasons HOAs get involved with lawsuits? Let’s take a look.

Most Suits Are the “Slip-and-Fall” Type

There are times when a lawsuit is dropped on the board’s collective lap as if falling from the sky, without the slightest warning. In most cases, however, boards typically know well in advance that a lawsuit is coming.

“Most of the time, when they are sued, they know something will happen,” says attorney Michael Merrill, a partner with the law firm of Merrill & McGeary in Boston. “It’s a confirmation of what they might know already.”

Many lawsuits are of the so-called slip-and-fall variety. In order for such a suit to be brought, someone had to have slipped and fallen.

“If someone is suing the association for bodily or property damage, it had to arise out of an incident,” says Bernie Gitlin, president and CEO of Global Insurance Network in Needham, Massachusetts. “These incidents are usually known by somebody—the super, the board, the property manager, someone.”

“There’s usually been a preliminary letter,” says Merrill. “It just doesn’t come out of the blue.”

Even so, notice of a lawsuit can be psychologically prickly. “The fact that it can just be dropped off”—devoid of fanfare—“surprises them,” Merrill says. Surprise can bring out a host of negative emotions, especially when the lawsuit is brought by a fellow resident.

“The first impression is to get angry at the person bringing the suit,” says Stephen Marcus, a partner with the law firm of Marcus, Errico, Emmer & Brooks, PC, in Braintree, Massachusetts. “What I wouldn’t do is notify the otherunit owners and try to put the person who brought the suit in a bad light.”

Lawsuits are part of the business of running an HOA. An unpleasant part, to be sure, but a part of the business nonetheless, especially for community leaders.

The president of the HOA, being the top banana, is generally the person named in a lawsuit, if an individual is named at all. While seeing your name on such a document can be frightening, it's nothing to stress about. As long as you are not guilty of a crime, your community association’s directors & officers (D&O) policy insulates you from any personal damages.

“People Sue All the Time”

Let’s say Resident Q sends said letter, is unable to resolve the problem with the association, and proceeds with the suit. What should the board do?

“Don’t panic,” says Marcus, with a chuckle. “People sue all the time.”

Because people sue all the time, there is a process that should be followed. Two steps are of the utmost importance.

“First, call their attorney,” says Marcus. “But also, in most cases, notifythe insurance provider or the master carrier. You want to put the insurance carrier on notice right away.”

The former is important because, inaddition to mounting the association’s defense—or helping the insurance carrier’s attorney mount it—the HOA attorney will make sure anything time-sensitive is handled promptly.

“Is there a preliminary hearing that has been scheduled that you have to deal with?” says Merrill. “You have to make sure you don’t miss a date in court that the other side has unilaterally scheduled.”

That said, there is no rush, per se. Defendants have 21 days to file their answers with the court. “Clients are concerned that something be done immediately, but nothing has to be done immediately,” says Merrill.

But notifying the insurance companyneeds to be done quickly, because it’s a policy requirement.

“If you know things and you don’t tell the insurance company, they [the company] can say, ‘You prejudiced our rights, and we won’t pay,’” says Gitlin.

For example, if Resident Q slips and falls on a patch of ice outside the building on the first of February, and the insurance company isn’t notified until late June, it’s difficult for the defense to investigate the circumstances.

“The snow has melted, it’s June, we have no way to reconstruct what happened,” says Gitlin.

Furthermore, if any case is covered under the HOA’s insurance policies—whether liability or D&O—they will appoint the attorney. Sometimes the appointed attorney will be the HOA’s own, but not usually.

“The insurance company will have alawyer they want to use,” says Merrill.

This can pose problems, because the insurance company and the HOA can have different priorities.

“It’s always a little bit of a beef with the insurance companies,” says Merrill. “The association is more concerned with the quality of the representation. The insurance company is more concerned with the financial [outlay].”

For example, the insurance carrier might budget $160 an hour for the attorney, but a more realistic number might be closer to $250 an hour. Other than convincing your attorney to lower his or her fee and convincing the insurance carrier to name him or her as counsel, there’s not much the association can do about this. If you pay the piper, you call the tune.

Few Cases Ever Go to Court

For all the lawsuits filed, very few make it to the inside of a courtroom. The reason is purely financial, and is all about risk and reward.

“Litigation is wildly unpredictable in terms of what it will cost or how far the case might go,” says Marcus. “A small claims action might not cost the unit owner much in legal fees. But a regular action? It could cost five to ten thousand dollars, and work up to—name a number. Twenty-five, 50, 100 thousand dollars.”

A lawsuit could wind up going to appeal, which could cost even more, especially in Massachusetts. The Massachusetts Condominium Act states that if a unit owner is sued for violations by the association and loses, the unit owner is responsible for the association’s legal fees.

“A violation, and the unit owner could pay legal fees on both sides,” saysMarcus. “The stakes are very high if a client loses. If a case goes for nine months or a year, it gets much more costly.”

Fortunately, that outcome is rare. The lion’s share of lawsuits never appear before a judge. “The percentage of cases that are settled, generally, is 97 percent in Massachusetts,” says Marcus. “Most cases do not end up going to full trial.”

This is good news, because even if a unit owner files a suit against the HOA, and the HOA wins, it can be costly. The insurance carrier may choose not to extend the policy.

“This happens all the time,” says Gitlin. “So you find another insurancecompany, usually at a higher rate.”

Minimizing Exposure

What can an association do to minimize exposure to lawsuits? “An HOA can try to manage its risks and control its losses,” says Gitlin. “Everybody in that association needs to be a loss control advocate. It’s to your advantageto have your association be loss-free.”

It all comes down to simple economics.

“Insurance companies are in business to make money by protecting you,” says Gitlin. “If they don’t make money, it will cost you money.”