How to Best Prepare and Protect Your Association (Oregon Law)

February 15, 2011 | By: Chris Tingey

Without a doubt, the most common question I am asked as an attorney by my homeowners’ association clients is “What can we do to protect ourselves from getting sued?” My answer is always the same: “Nothing!” In this era of quick-trigger and frequent litigation, there truly is nothing that an association can do to stop itself from being sued. However, it is important to understand that the clients are asking the wrong question. Instead, they should be asking what the association can do to protect itself from being held liable in a lawsuit.

There is, truly, a great deal that associations can do to protect themselves from being found liable in a lawsuit. It is important to determine the sources of potential liability in the association and take protective measures to limit or eliminate the potential liability. Such action may not stop you from getting sued, but it certainly will limit the effectiveness and pain of such a suit. To that end, I offer three basic tips to assist association boards in understanding their liability risks and taking steps to limit it.

1. Know the sources of potential liability.
2. Insurance, insurance, insurance.
3. Be proactive.

First, it is important for association boards of directors to understand the sources or bases of potential liability. For example, does the potential liability arise from a contract to which the association is a party, general principles of tort law, such as negligence, or a statute such as the Planned Community Act or Condominium Act? The source or basis of potential liability often affects many issues involved in a lawsuit, such as insurance coverage, indemnity obligations, and statutes of limitation. In assessing these issues, boards should visit with their legal counsel to discuss their rights, responsibilities, and ramifications of their actions.

Second, association boards should make certain that their association’s insurance coverage is current and adequate. Boards should review their coverage at least annually, and should meet with their broker to discuss their needs. A straight renewal of the existing policies may be sufficient on some occasions, but boards should not simply rely on last year’s insurance in determining this year’s insurance needs.

Finally, association boards need to be proactive in their efforts to limit or eliminate potential liability. Boards should meet with their experts—accountants, reserve study specialists, management team, insurance broker, maintenance team, attorneys, and others—at least annually to gather the information necessary to protect the association’s assets and members. Boards should keep their eyes open about the condition of the common property in the community. They should ensure that the governing documents are being enforced evenly and consistently.

In short, anyone can sue another at any time for anything. Now, whether the lawsuit has any merit is another question. But, association boards can limit or eliminate potential association liability by following the three guidelines discussed above.