The Association Has Been Sued: Now What?

As attorneys, our job is to help associations stay out of the courtroom.  We do this by practicing proactive lawyering and helping associations develop a risk management team to help keep unwanted litigation to a minimum.  Every association should have a team of professionals on its side, including attorneys, insurance agents, bankers, and accountants.  But even the most well-run association can be slapped with a lawsuit from a disgruntled owner or vendor.  Using an association’s team of experts when a lawsuit comes in is key to successfully defending any claims of wrongdoing.

When a lawsuit commences, a court will send a copy of the filed complaint along with a summons to the Association—usually to its statutory agent, but sometimes also to the Board President or possibly even the management company.  The day you receive a copy of the complaint and summons is when the clock starts ticking and action must be taken quickly.

The first phone call you should make if you are served with a lawsuit is to us, your attorneys.  We will review the complaint and note the deadlines for a response.  We will also examine the factual and legal allegations contained in the case.

Once we have determined the allegations at issue, we will usually need to review the association’s insurance policy to determine if a call should be made to your insurance agent. 

Typically, insurance policies contain provisions requiring associations to notify the company of any allegation of wrongdoing, whether the allegation will be claimed under the policy or even covered.  An association should ask its agent for the notification requirements, and if so required, the pending complaint should be reported.

As a side note, when considering what to report, a lawsuit is an allegation of wrongdoing, of course, but receiving a demand letter, a cease and desist letter, or even a request for a reasonable accommodation may be considered an allegation of wrongdoing by your insurance company.  That is why knowing and understanding the reporting requirements in your policy is very important.  Failing to report allegations of wrongdoing may limit the benefits you receive under your insurance policy, or even risk termination of the policy entirely.

Many insurance policies cover the legal defense of certain claims, meaning that your insurance company will hire and pay for an attorney to represent you in the lawsuit.  Some of the allegations in the complaint may even be covered up to the policy’s limits.

If the insurance company defends the association and hires an outside attorney, our office will co-counsel with the new law firm on the case.  Our firm will be able to help insurance counsel, as it is usually the case that our firm has intimate knowledge of the dispute, and act as a liaison between the association and the new lawyers.

While we sincerely hope that none of you ever experience being sued, the reality is that many of your associations will be sued at some point.  Assembling and utilizing a professional risk management team should increase your success in any unwanted litigation.

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