How to Avoid Getting Sued as a Board Member (Idaho Law)

January 6, 2014 | By: Sarah Anderson

Defending your association in a lawsuit can be costly, time-consuming, and may hinder your board’s ability to function effectively.  Your association’s board of directors is required to respond and defend the association in all lawsuits filed against them, regardless of the merits of the claims. Simply responding to a lawsuit and getting the court to dismiss it can cost the association thousands of dollars.  For these reasons, all lawsuits should be taken seriously and avoided if possible.  There a number of steps that can be taken to reduce the likelihood of a lawsuit, or minimize the damage to your association, should a suit be filed.

First and foremost, verify with a reputable insurance provider that your association has adequate insurance coverage, including directors and officers coverage.  Although most governing documents contain an indemnification provision that may limit a board member’s personal liability for the association’s actions, indemnification does not protect the association, and in turn its members, from being forced to pay out of pocket for expenses incurred in your defense and any associated damages determined by a court.  Proper insurance coverage will not prevent you from being sued, but it will protect you and your association from bearing the burden of associated expenses.

Any person or entity may sue the association, but most frequently associations are sued by their own members. Most member complaints, and lawsuits, arise from a handful of circumstances that can easily be avoided by a diligent board of directors.  So, before you are sued, there are five simple preventative measures your board can take to avoid a visit from a process server this holiday season.

Adopt Procedures:  As a Board, adopt procedures for handling business as an association, especially for enforcement actions. Follow those procedures and provide copies of the procedures or guidelines to the owners. Not only will this satisfy most legal notice requirements and create a record that the board can rely on, but it helps ensure continuity in enforcement and prevents claims of arbitrary or selective enforcement.

Provide Notice and an Opportunity for Hearing.  Include in your enforcement procedures adequate notice and an opportunity for hearing, even if not required in your governing documents.  Be sure to follow these procedures to the letter in any enforcement action and carefully document each step.

Listen and Respond to Members:  It seems simple, but many members who voice complaints or requests are merely seeking acknowledgment and response to their questions and concerns.  Listen to your members and respond in a timely manner.  This can be done by written response, or at an open forum portion of regular meetings.  If a board ignores its members, those members may think their only option is to sue the board for answers or resolutions.

Involve Members:  When appropriate, especially when dealing with a controversial association matter, seek member participation and comments.  If a certain action requires a vote of the members, advertise the meeting well, and obtain the proper member approval.  If a member complains about the result, they then have only themselves to blame.

Retain Legal Counsel and Rely on Experts:  Unfortunately, most boards do not consist of an attorney, accountant, and a property manager.  This means that it is often prudent to seek advice from experts.  Boards have the power and responsibility to rely on experts to review their books, counsel them on legal action, resolve problems in the community, etc.  Have an accountant review your financial records annually.  Counsel with an attorney if there is a question regarding the legality of proposed board action.  Have your governing documents and enforcement provisions reviewed, if not drafted, by an attorney to ensure that they are up-to-date and enforceable.

While these five pieces of advice will decrease your chances of being sued, sometimes a lawsuit is inevitable.  If you are sued or are concerned that you may be sued, seek legal advice from an attorney immediately and verify proper insurance coverage with your insurance provider.