Discrimination Lawsuits against HOA’s

Immediately we assume discrimination cases deal with race or gender. In discrimination cases against HOA’s (the most common D&O claim facing us today) it usually has nothing do with either. So, what are they about?

Let’s set up the scenario: A property manager drives through a neighborhood taking note of violations of by-laws – such as a home being painted blue. They proceed with the standard notification process of violation. However, the homeowner feels they are being discriminated against and files suit. After all, their neighbor painted their house white 2 years ago. Why are they being treated differently?

How about the homeowner that was told by the board they could not build a fence. Unknown to the board, a previous board member had allowed a different homeowner to build the same fence. Now the homeowner has filed a discrimination suit against the board and the property manager.

Simple. A precedent was set by previous board members in both scenarios. This is where HOA boards can get in trouble. They don’t know what was approved prior to them serving on the board.

This again leads us back to why D&O liability coverage is so important, and making sure your HOA has an inclusive package, as opposed to an endorsement. It will save your board money and headaches.

Think about this: When a lawsuit hits the desk of the HOA board, they have to defend themselves. If you don’t have appropriate D&O coverage, you may be pulling out the checkbook to pay the attorney retainer for thousands of dollars, as opposed to having the correct coverage for significantly less.