The recent shooting death of Trayvon Martin, a 17-year-old high school student in Sanford, Fla., should prompt homeowners to ask some hard questions about their homeowners association's risk-management practices and insurance policies.
That's because Martin's family might sue not only George Zimmerman, the neighborhood watch leader who killed Martin, but also the homeowners association (HOA) that started the neighborhood watch group, according to news reports.
Homeowners are responsible for the HOA
As a homeowner in an HOA-governed community, you're not personally responsible for injuries that result from other people's actions; however, the HOA can be found liable, explains Ellen de Haan, a community associations attorney in Clearwater, Fla.
"As an individual owner in a homeowners association, you have virtually no liability on a personal level unless you were actively involved in the crime," de Haan says. "An innocent bystander [who] has nothing to do with the incident is not going to have any personal liability."
But there's a catch: you and the other homeowners are collectively responsible for your HOA's financial obligations. If the HOA's liability exceeds or isn't covered by its insurance and financial resources, you could face a special assessment to make up the shortfall.
What's your association's responsibility?
That raises important questions as to what is and isn't your HOA's responsibility -- and it's not always easy to tell. Activities that involve HOA committees, publicity and finances tend to be official, while those that involve only informal groups tend not to be. There are also gray areas such as HOA-sponsored parties to which you and other residents and outsiders are invited, de Haan says.
Whether an individual, such as George Zimmerman, or an HOA, such as the association that governs the community he was patrolling, would be held responsible for an injury or death in an HOA common area depends on a long list of factors.
"This is not a simple matter," de Haan says.
If an individual or HOA were found responsible, the question then would be whether insurance would cover the damages. Deliberate actions typically are excluded.
"If you're found to have intentionally done something or you're found to be guilty in a court of law, then [the insurance] is not going to pay," de Haan says. "It's against public policy for an insurance company to insure someone against their own wrongdoing."
State laws that govern HOAs might offer some additional protection, according to Beth Grimm, a community associations' attorney in Pleasant Hill, Calif. For example, she cites a California law that she says limits individual homeowners' liability if the association maintains certain levels of insurance.
You can buy more insurance on your own, too. Liability insurance covers risks within your property, while loss-assessment insurance can kick in if your HOA levies a special assessment. In some cases, that could cover an assessment triggered by an insurance deductible.
Neighborhood watch groups
Grimm says a neighborhood watch group is a good example of the complexities of the HOA liability issue.
"To the extent that the association gets involved and calls neighborhood watch meetings and those sorts of things, it's potentially at risk for anything the owners go out and do on their own," she says. "If the association is going to take a strong role, it needs to put out the appropriate cautionary information."
Thomas Skiba, CEO of the Community Associations Institute (CAI), an organization in Falls Church, Va., that educates homeowners and association board members and managers, says neighborhood watch programs can deter crime and ease residents' fears, but appropriate procedures are essential to make sure volunteers understand and accept their limits.
Here are a few CAI tips on starting a neighborhood watch program:
- Contact the local police department for startup support, guidance and training
- Consult an attorney who's an expert in community association law
- Create a process to recruit only responsible volunteers who will follow procedures
- Use websites, email and other means to keep residents and volunteers informed
- Frequently reinforce the procedures, including do-not-engage rules for volunteer neighborhood watchers
These tips can help in other situations, too, since they emphasize what's important: planning, training, legal advice, procedures and monitoring.
Hazards can trigger injury and liability
There's no shortage of risks, by the way. Experts say HOAs can be found responsible for injuries or deaths that occur in common areas due to buckled walkways, dark garages, swimming pools, maintenance work, elderly trees and speeding vehicles, among numerous other possibilities.
Grimm suggests some additional measures that also can reduce an HOA's risk:
- Set up committees that can operate under the umbrella of your association's directors-and-officers' liability insurance coverage
- Hire construction, repair, maintenance and management contractors who have their own liability insurance
- Require homeowners who use common areas for private functions to obtain liability insurance for those events, naming the association as an additional entity covered by the insurance
The bottom line is that homeowners who are subject to an HOA do face an extra layer of risk. But de Haan says major liability cases that involve big damage awards are rare and shouldn't deter you from buying a home within an association if you want to take advantage of the amenities these communities offer.
"Community associations have been flourishing since the 1960s," she says. "If they weren't a good idea, they wouldn't have proliferated."
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Marcie Geffner is an award-winning freelance reporter, writer, editor and blogger whose work has been published by MSNBC, CNBC, Yahoo! Finance, Fox Business, Bankrate.com, AOL Real Estate, ThirdAge.com, Fidelity.com, Inman News and dozens of major U.S. newspapers. She holds a bachelor's degree in English from UCLA and MBA from Pepperdine University. You can follow Marcie on Twitter: @marciegeff.