INSURANCE: POTENTIAL LIABILITY FOR INTERFERING WITH CLAIM

t is not uncommon for a member of a condominium association to file a claim for damages with the association=s insurer. What is uncommon is for an association director to interfere with the claim process. Interfering with the claims process may open the association and the director up to a breach of fiduciary duty claim.

A recent Florida appellate court ruled an insurer must produce documents from an association regarding the association=s request that the insurer stop investigating a claim filed by a unit owner directly with the insurer. In Allstate Insurance Company v. Cambron, 31 Fla. L. Weekly D2326 (Fla. 5^th DCA, September 8, 2006), the owner of a condominium unit sued the condominium association and three board members alleging the association refused to fix the leaky roof over his unit.

The owner claimed the board ignored his numerous complaints about the roof. As a result of the association=s alleged failure to repair the unit, the unit was apparently condemned by the local governing authority. The owner alleged the board members breached their fiduciary duty by refusing to fix his unit.

The owner previously filed a claim directly with Allstate. The owner claimed he was advised by an insurance adjuster that Allstate stopped its investigation at the request of the condominium association. The owner believed the board stopped the investigation of his claim because of animosity between the board and himself and not because there was not an insurable claim.

The trial court ordered Allstate to produce copies of letters from the condominium association to Allstate concerning the handling of the claim. Allstate argued that the documents sought were prepared in anticipation of litigation and thus were privileged and exempt from disclosure. The Florida appellate court agreed with the trial court that documents indicating the board instructed Allstate to stop investigating the owner=s claim would be relevant to the owner=s breach of fiduciary duty claim.

AA letter from a condominium association to its insurer requesting the insurer to investigate (or not investigate) a claim of water damage by a unit owner is not a document which would normally be considered work-product,@ the court stated. AIndeed, this type of document is usually prepared in the ordinary course of business of a condominium association and made available for inspection by unit owners.

Nonetheless, the court found that the trial court=s order was overly broad because it would require Allstate to produce correspondence from the association after the unit owner filed his lawsuit. The appellate court ordered the trial court to limit the documents required to be produced by Allstate to those documents from the condominium association regarding any request to investigate or not investigate the claim filed by the unit owner directly with Allstate.

Associations pay a lot of money to insurers. If an owner submits a claim for damage, it normally is appropriate to let the insurer investigate the claim. That is what they are paid to do. While it is appropriate to apprise an adjuster of the facts, by all means, do not interfere with the investigation process. 

FINANCES: UNAUTHORIZED CREDIT CARD EXPENDITURES

Right here in Palm Beach County we have read repeated reports in the news about employees using corporate funds for their own use. This news highlights the importance of being vigilant with corporate funds. Officers and directors have duties involving this oversight. 

The use of credit cards by an association has the potential for unauthorized expenditures of association funds. Ideally, it is best for associations to issue checks for each expenditure. The use of checks provides a record of the expenditures and reduces the likelihood of unauthorized or undocumented use of association funds. 

It is recognized that an association credit card or debit card may be useful in the case of an emergency, such as the need for supplies just before or after a hurricane. To reduce potential problems, a board of directors should adopt a resolution outlining a strict policy limiting the use of the card. The officers authorized to use the card should be specified and the number of authorized users should be limited. 

Most importantly, use of the card must be limited to association business. The authorized users of the card must timely submit invoices or receipts along with an explanation for all payments. The invoices should be compared to the monthly statements. Any unauthorized charges should be immediately addressed. 

It is recommended that the card be clearly marked so that it is not confused with an authorized user=s personal card. To avoid inadvertent misuse of the card, it is suggested that the card be stored in a separate location, such as a locked safe in the association's office. The card should only be removed when necessary

.FIRM NEWS

Michael Gelfand will be lecturing on condominium and homeowners= association dispute resolution at the Florida Bar=s Real Property Litigation Seminar on January 12, 2007. Florida attorneys attending may receive continuing education credit. For Seminar information, contact www.flabar.org. 

HAPPY HOLIDAYS! 

In observance of national holidays, the firms offices with be closed Monday, December 25, 2006 and Monday, January 1, 2007. We wish all a very happy holiday with peace and good health for the new year.

8 2006 by Gelfand & Arpe, P.A.