Insurance policies can be convoluted and confusing. Diligently reviewing your community association’s insurance policy to ensure that coverage (1) meets the minimum requirements imposed by the Governing Documents and/or applicable Arizona law (specifically as to Condominiums); and (2) meets the Board’s expectations, is vital.
In Dollar Point Association, Inc. v. United States Liability Insurance Company, No. 2:22-cv-0995-KJN (E.D. Cal. May 18, 2023), The U.S. District Court for the Eastern District of California held that a community association’s insurance policy did not provide coverage for the costs of defending against nonmonetary claims by a homeowner. Dollar Point had been sued by a homeowner and the lawsuit sought equitable relief only (i.e. no monetary claims). The insurer initially provided defense coverage; however, it did so under a reservation of rights, and subsequently denied the claim. The court found that the language in the policy provided that only monetary claims were covered, and therefore, the insurer was not required to provide defense coverage for the lawsuit. While the Association argued that the language was ambiguous and should be interpreted in favor of the insured, the court did not find the Association’s position compelling.
While this case is not binding law in Arizona, it is an important reminder that Board Members need to be aware of the exact types of claims that are/are not covered. Make certain to thoroughly review your policy, talk through any issues/questions with your agent, and seek legal counsel to clear up any remaining issues.
If your Board is considering seeking legal counsel, please contact Mulcahy Law Firm, P.C., for assistance or review our Cheat Sheet on this topic.