Natural disasters have taken their toll on premises liability insurers. Six companies insuring property losses in Florida have failed because of the large amounts of claims resulting from Hurricane Andrew. Hurricane Andrew's effect on Florida and Louisiana together with the Hurricane Inetki's effect on Hawaii reduced insurance companies' reserves.

Businesses, associations, and individuals are affected by insurer insolvencies. Property owners and property management companies are reviewing the adequacy of their insurance. Insurance reviews include the amount and extent of coverage, as well as the reserves and stability of the insurer.

How does an insured determine the security of an insurance company? Two widely utilized references are Bests' Guide of Property/Casualty Insurance Companies, and Best's Insurance Management Reports. These reports are generally available through insurance agents and larger libraries.

The State of Florida insurance guarantee fund provides some protection against insurer insolvency; however, reliance on the fund can be costly. The guarantee fund is a source of funds to pay claims when an insurer is insolvent. Claimants to the guarantee fund may find that claims must be reduced to less than full value and there are delays in payment. Recently claims exceeded the state guarantee fund's balance. If the Florida legislature did not pass a supplemental appropriation then claims would have remained unpaid.

Corporations, whether for profit, condominium or otherwise are inquiring whether they may have nominating committees. Nominating committees can help corporations ensure that sufficient qualified candidates are nominated for directors' terms open for election. Nominating committees can be abused, turning into a tool to keep inefficient directors in power. Because of perceived abuses condominium and cooperative associations may not have nominating committees, but an condominium or cooperative association member can provide for his or her nomination by another member.

For corporations other than condominium and cooperative associations, the provisions of the Florida Business Corporation Act, §607.0825 Fla. Stat. (1991) and the Florida Not-For-Profit Corporations Act, §617.0825 Fla. Stat. (1991), apply. The statutes contain in nearly identical language the following pertinent provisions:

(1)   Unless the articles of incorporation or the bylaws otherwise provide, the board of directors, by resolution adopted by a majority of the full board of directors, may designate from among its members an executive committee and one or more committees each of which, to the extent provided in such resolution or in the articles of incorporation or the bylaws of the corporation, shall have and may exercise all the authority of the board of directors, except that no such committee shall have the authority to:

(a)   Approve or recommend to the [shareholders or members] actions or proposals required by this act be approved by the [shareholders or members].

(b)   Fill vacancies on the board of directors or any committee thereof.

(c)   Adopt, amend, or appeal the bylaws.

Thus, because a nominating committee recommends election choices which require action by members/shareholders, a nominating committee cannot be created solely by the directors.

The creation of a nominating committee must be authorized by a corporation's articles of incorporation or bylaws. Because of new balloting requirements effective October 1, 1992, homeowner associations may desire to amend their documents to provide for nominating committees so that sufficient nominations are obtained before ballots are sent to owners.

The law also sets out how committees are to be appointed unless otherwise designated in a corporation's Articles of Incorporation or Bylaws. A committee also must consist of two or more members. The Board of Directors rather than any single person has authority to appoint the members of a committee as well as remove members of a committee. Many corporate bylaws provide that committee members may be nominated and removed only by the President. Committees are required to keep proper minutes and report their efforts to the Board of Directors. Committees, except for all properly authorized executive committees, do not have authority to act on behalf of the corporation.

This information is provided only for public information purposes and is provided without obligation or fee. It is distributed to the firm's association clients to provide a general notice of recent changes in the law. This information is not to be considered as legal advice. The changes in the law may not been reviewed by the courts and may be subject to challenge. Before taking any action you are urged to consult with counsel to ensure that your legal rights are being protected.

© 1993 by Gelfand & Arpe, P.A.