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July 1, 1993 INCREASED DIRECTOR LIABILITY
Association directors may now be personally liable on a greater basis for their bad judgment than previously. Florida's Fourth District Court of Appeals recently held that associations cannot assess owners for monies spent on matters for which the association could not legally spend monies, even if the assessment was approved by a directors' vote. This conclusion results from Mead v. Ocean Trail Unit Owners Association Inc., ___ So. 2d ___, 18 Fla. L. Weekly D464 (February 10, 1993), in which it was held that a condominium association's general corporate powers do not allow associations to levy assessments for just any purpose desired by an association's directors. The background of the Mead decision may be familiar to many Palm Beach County residents, especially those residing in the northern part of the county. Ocean Trail Unit Owners Ass'n, Inc. sought to purchase property adjoining the Ocean Trails condominium. A number of owners objected to the purchase. A trial court and an appellate court confirmed that the purchase was invalid because the condominium association was not legally entitled to purchase the property. When the purchase was disallowed, many owners, including Mr. Mead, refused to pay a special assessment for indirect costs relating to the purchase. Although associations may be generally empowered to collect assessments from unit owners to pay for common expenses, the costs and expenses associated with its directors' erroneous acts may not be passed on to the unit owners. The appellate court focused on what are the association's authorized powers. The special assessment was levied to pay expenses concerning the property purchase, other than the purchase itself, to reimburse owners who had paid for the purchase, and to pay indirect costs. Some owners were entitled to a refund from the association when the purchase was disallowed. The court ruled that the assessment, though not used directly for the improper purchase, was used in conjunction with the improper purpose. Because of the assessments relationship to the improper purpose, the assessment was struck down. If the future effect of the Mead decision is that associations cannot assess for technically unauthorized expenses, then someone still has to pay for the debt incurred. Undoubtedly directors will be held liable to innocent creditors if an association cannot pay association debts. In light of the Mead decision it is essential that directors carefully refer to their association's governing documents before entering into unusual transactions. Directors may desire to make an independent determination whether a proposed transaction is beyond the scope of their authority. Because there is the possibility that the documents will be erroneously interpreted, associations should consult with their insurance provider to ensure that their association and directors have adequate coverage, and if necessary amend their declarations or bylaws to allow their associations to purchase directors and officers' liability insurance. LIMITED LIABILITY FOR CHARITABLE NON-PROFIT VOLUNTEERS
Directors and officers of non-profit organizations exempt from federal income taxation are now protected from some types of civil liability. Recently the Florida legislature enacted the Volunteer Protection Act, Chapter 93-139 Florida Laws . The Act, tentatively assigned §768.1355 Fla. Stat. (1993), limits liability for volunteers, including an officer or director, performing services for certain non-profit organizations. The law applies under specific circumstances when a volunteer's act or omission results in personal injury or property damage. To avoid liability, the volunteer must have acted: a) in good faith; (b) within the scope of his or her volunteer service for the tax exempt organization; and, acted as an ordinary reasonably prudent person would have acted under the same or similar circumstances. The injury or damage must not have been caused by the volunteer's wanton or willful misconduct. The Act does not exempt the charitable organization from liability. If the Act shields a volunteer from liability, then the organization for which the volunteer acted will be liable for the damage or injury. The organization's liability will be the same as the volunteer's if the Act was inapplicable. Officers and directors of associations for condominiums, cooperatives, and other developments generally will not be able to take advantage of the Act for their voluntary association service. Most associations, though they do not pay taxes, are not exempt from federal income taxation. Thus, because the Act is applicable to only volunteers of tax exempt non-profit organizations, association volunteers are not generally affected by the Act.
The firm's May 1993 "Memorandum to Clients" discussed the possibility that condominium associations may be liable for the injuries sustained by subcontractors' employees; thus, associations may need to obtain their own worker's compensation insurance. Associations when acting as a contractor, whether condominium, homeowners, cooperative or otherwise, should be aware of their potential liability under the Workers' Compensation Act. Even if Workers' Compensation immunity from an employee's damage claim is applicable to associations, this immunity is not absolute. Association's acting as a contractors will be liable if the injuries sustained by the subcontractor's employee was a result of the association's intentional conduct. In a recent decision, Florida's Third District Court of Appeal held that a contractor's immunity will be lost if the employees' injuries occurred because of the contractor's deliberate intent to injure, or if the contractor takes an action substantially certain to result in injury or death. Mathews Corp. v. Peters, ___ So. 2d ___, 18 Fla. L. Weekly D82. This "intentional tort" exception to the immunity granted under the Worker's Compensation Act has been reaffirmed by the Fourth District Court of Appeals in Power Plant Maintenance Company, Inc. v. Gardner, 18 Fla. L. Weekly D1147. Associations, regardless of whether they are covered by the Worker's Compensation Law, are urged to consult with their insurance agents to ensure that they are adequately covered.
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