Border Protection – Six Reasons to Stay in Your (HOA) LaneOct 04, 2021
By Kelly G. Richardson, Esq.
Last week’s column reviewed the roles and boundaries of each HOA team member. While sometimes it can seem frustrating for volunteer leaders to adhere to their role as directors, there are at least six reasons to do so.
- Statutory Immunity: Civil Code Section 5800 gives HOA leaders immunity if the HOA has certain minimum Directors & Officers (“D&O”) insurance coverage in place. The protection is limited to acts or omissions “performed within the scope of the officer’s or director’s association duties.” (Section 5800(a)(1)). So, if a team member acts outside their duties, they also act outside the liability protection of this law. For example, if someone allegedly negligently repaired a gate, that would likely be characterized as outside their governance duties and therefore outside their immunity.
- Insurance: D&O insurance typically has language following the Civil Code Section 5800 language, meaning that those acting outside the board role may be outside the protection of the D&O insurance in addition to outside their statutory immunity.
- Accountability: If directors become involved in implementing decisions it interferes with the performance of the vendor hired to execute the decisions (often the manager). The most common explanation I hear from volunteers stepping into co-management activities is “if I don’t do it nobody will.” However, taking over management activities makes it far more difficult to hold the manager or vendor accountable for their failure to do the work – now they have an explanation – “I can’t do it, they won’t give me a chance.” Expect your manager and vendors to meet their responsibilities and don’t step in when they fall short – you may find that they rise to the occasion, but if they don’t, then hold them accountable. I have many times listened to managers express their discouragement and frustration because of a director who interferes with the manager’s job.
- Standard of Care: When stepping outside of the board role, directors may take on a completely different legal exposure. For example, the director who personally cuts down a tree may be held to the standard of care of arborists or tree removal firms. If the tree falls the wrong way and hurts someone, the director likely cannot claim immunity - they acted as a tree remover, not a director.
- Conflicting Instruction: Directors who step outside their role often do so in their zeal to protect the HOA and “get things done.” However, this interjection increases the probability of overlapping or conflicting instructions to vendors. If the manager tells the maintenance vendor to repair a broken item tomorrow, and a director says to wait for further instructions, and still another director says not to repair it but to put some fresh paint on it, whom does the vendor obey? Staying within one’s proper lane avoids such conflicts.
- Unauthorized Actions: The ultimate boundary violation problem arises when a director authorizes a vendor expense without board authority. In that situation the vendor often can force the HOA to pay, even though the board didn’t approve it, under the doctrine of “ostensible agency.” If the board does not ratify the unauthorized commitment, the HOA could require that director to reimburse the HOA for the expense.
There are other reasons to stay in one’s lane, but hopefully these are sufficient!