When dealing with complicated contracts, it is often tempting to overlook the small print. However, what lies deep within a written agreement can often become the subject of a significant and expensive dispute. Because clients often admit they do not read what they sign, it bears repeating another time that it is imperative for anyone signing a contract to read and understand all the terms of the agreement. This is especially true for insurance policies.

In a decision that impacts all property owners, including condominium and homeowners’ associations, Hoey v. State Farm Florida Insurance Company, 33 Fla. L. Weekly D 1780 (4^th DCA, July 16, 2008), owners of a house returned after a few months away to find their house flooded. The flood was caused by a damaged toilet supply line. The seeds of the litigation were formed by the owners’ insurance policy which excluded damages "caused by or resulting from continuous or repeated seepage or leakage of water or steam which occurs over a period of time and results in deterioration, corrosion, rust, mold, or wet or dry rot."

How do you prove the circumstances of a leak when the leak was not witnessed because the owners were away? Clever insurance counsel used the owners’ monthly water bills to demonstrate that while the owners were away, water use gradually increased, from zero to over 400 gallons a day. Something definitely started to leak!

The trial court found that the damage in the home fell within the insurance policy’s exclusion; thus, the homeowners insurance policy did not provide coverage for the loss. The Florida appellate court agreed with the trial court’s finding. The appellate court noted that the water bill’s uncontradicted evidence of the gradual increase in water usage showed a "continuous or repeated leakage or seepage of water."

The Hoey case exemplifies how important it is for associations to read their insurance policy. Had the homeowners in Hoey been more diligent, they may have chosen a policy, or obtained an endorsement, that would have protected them from this type of loss.

It is no revelation that in nearly every community association there are owners who seek to circumvent restrictions. Sometimes it is just for the effort to challenge authority. Sometimes the challenge is because of belief in a position.

Perhaps during ancient times some owners challenged authority, creating a nuisance by leaving their swords on the front steps or practicing the unsightly method of drying togas in their front window. Throughout time however, one thing is certain, there will always be people who try to beat the system.

Humor aside, laws such as the Florida Civil Rights Act and Fair Housing Act are designed to protect individuals from discrimination and other unfair treatment. These laws have assisted many residents. Nevertheless, many owners have sought to sidestep restrictive covenants by alleging circumstances to shield themselves from enforcement, leaving the question of how far can an association go to investigate an owner’s allegation of circumstances that would exclude them from enforcement of certain restrictions. Or put more simply, when is an owner required to "show their cards?"

In Miller v. Savanna Maintenance Association, Inc., Fla. L. Weekly D11956 (Fla. 4^th DCA, April 30, 2008), the Association sued Ms. Miller to prevent her from operating a licensed Assisted Living Facility within her home. Not surprising, the Association claimed operating a nursing home within the community was in violation of the Association’s regulations. More specifically, the Association asserted Ms. Miller was violating the Association’s rules by having more than one family unit in her residence. As a defense, Ms. Miller claimed that the ten persons who resided in her residence were "handicapped," and therefore, enforcement of the Association’s rules in her case violated the Florida Fair Housing Act.

The Association questioned the veracity of Ms. Miller’s allegations that the residents were "properly handicapped" in order to need assistance for daily living. Therefore, the Association sought the names and addresses of the residents, and their relatives, purportedly in order to take their depositions. Ms. Miller refused to provide the information, claiming this would violate the privacy rights of her residents and their relatives.

The trial court ordered Ms. Miller to disclose the names and addresses of current and former residents. The Florida appellate court rejected Ms. Miller’s objections because the trial court balanced the privacy interest against the need to obtain the information.

The Miller decision points out that private information may be revealed when unit owners claim circumstances that exempt them from association regulations. This case provides associations reasonable means to investigate challenges to the enforcement of their governing rules. Above all, this case reinforces an age old premise, perhaps even familiar in ancient times, although a poker face is essential in any game, you will eventually have to show your cards to win.

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