Monday, August 24, 2015

Does your community's relationship with your insurance agent qualify as a "special relationship"?


Does your board consider itself  "special" in the eyes of your insurance agent? Do you believe your agent has a duty to advise you whether or not the coverage you are purchasing and the limits you are seeking are sufficient?

You might be under the illusion that your agent owes you a greater duty than he or she really does unless your relationship meets a certain standard.

Your board may believe that your insurance agent has a duty to advise you, among other things, about the type of coverage you need and the amount of limits you should carry. However, in the absence of a "special relationship" and certain circumstances, you may be sorely disappointed to learn that your relationship with your insurance agent is merely "ordinary".

In an "ordinary" client-agent relationship, the agent typically has the following duties to his or her client:
  • to procure the insurance coverage requested by your board using a level of skill, care and diligence which is standard in the industry;
  • to inform your board if he or she cannot procure the coverage you have requested; and
  • to not mislead or misinform your board about your coverage.


    Courts are more likely to hold an insurance agent to a higher standard of care with special relationship clients, so it makes sense for your community to become one of those "special relationship" clients. So how do you do it?

-Seek out an agent who is recognized as an expert in the industry.

-Insist on a relationship with your agent that consists of more than just the purchase of a policy or policies. 

-Ask your insurance agent to serve as a professional adviser in terms of the coverage you are seeking and get him or her to confirm that role in writing. This role should also be filled by your association attorney. If you do not understand your insurance purchase, ask your agent to explain it to you, in writing.

-Demand extra time and resources from your agent particularly if you are paying him or her any compensation in addition to his or her commission.

-Have a long-term relationship with your agent.

If you would like more out of your relationship with your insurance agent than simply a sales transaction, you will need to demand it. By doing so, you may also be able to hold him or her responsible for any negligence in the unfortunate event you do not receive the proper advice.




 

Friday, August 7, 2015

Florida's Community Association Arbitrators seek Salary Review


Florida's Department of Business and Professional Regulation pays six full-time "Senior Attorneys" to act as arbitrators in the Arbitration Section of the Division of Condominiums, Timeshares and Mobile Homes approximately $52,000 per year to handle numerous disputes throughout the State. The alternative dispute resolution provisions found in Section 718.1255 of the Florida Statutes were designed to prevent Florida court dockets from being clogged with certain types of disputes which routinely arise in the condominium and cooperative setting as well as to provide a more cost-effective option to court litigation for owners.

 
Florida's condominium arbitrators feel that they are grossly underpaid in comparison with other hearing officers employed by the Sunshine State and, it turns out, they are probably right.  In a May, 2015 "desk audit, Florida's DBPR arbitrators asked the state to reconsider their salaries. In their request, the arbitrators state that the work they perform is analogous to that performed by the attorneys employed as Public Employee Relations Commission (PERC) Hearing Officers who preside over disputes of limited jurisdiction. For comparison's sake, PERC hearing Officers earn $90,047 annually. Another comparable position is the Reemployment Assistance (RA) Appeals Manager for the Department of Economic Opportunity. RA Appeals Managers earn an annual salary of $84,999.96.

 
There are only six Division arbitrators (plus the chief) for the entire state. The DBPR collects millions in fees each year from condominium and cooperative owners. Sadly, those funds are usually diverted to the general operating budget each year. Regardless of how you feel about the Arbitration Program, its effectiveness or attorneys in general, having experienced attorney arbitrators to resolve association disputes is a good thing. Underpaying people is a surefire way to have them look elsewhere for a job.

 
Is the message here that the resolution of association disputes just aren't as important or valuable as other types of disputes being handled by State Agencies? If the reasons articulated in Section 718.1255(3), F.S. for the creation of an alternative dispute resolution system remain true, why is the State balking at properly funding that system?

 
If you agree that Florida's Community Association Arbitrators should be paid commensurate with arbitrators for other state agencies, you can contact Ken Lawson ken.lawson@myfloridalicense.com and Kevin Stanfield at Kevin.Stanfield@myfloridalicense.com and let them know you want them to approve the arbitrators' request for salary review.

 

 

 

 

Monday, July 20, 2015

Will Florida's new online election law for community associations spell welcome relief or more headaches?


The Florida Legislature recently approved a new law which will allow community associations to conduct their elections online through the use of electronic voting. While associations in other states have had this ability for some time now, this is a sea change for the millions of Floridians living in shared ownership communities.

For years, many of the disputes in condominiums, cooperatives and homeowners associations, have stemmed from the annual meeting and election process. People who ran for the board and weren't elected were convinced that the current board or the manager who doesn't like them somehow "kept them off'.  We've heard tales of ballot boxes being stuffed, tampered with and altogether ignored. In the condominium setting, allegations of forgeries on outer envelopes is always a concern while in the HOA setting, complaints of rampant proxy abuse are common in connection with the election of the board members.

Howard Perl, a Shareholder with the law firm of Becker & Poliakoff, has handled these disputes for more than a decade. "Many of the disputes involve judgment calls. Some ballots are discarded when they shouldn't be and others are allowed when clearly they should have been invalidated" he explained.

 
Election disputes don't come cheap. They are subject to mandatory arbitration with a Florida state agency and can cost up to $5,000 or more depending on how hotly contested the matter is.  Florida's Department of Business and Professional Regulation will be meeting in early August to begin drafting rules to address the new statute.

 
Now that the path has been cleared to allow Florida's associations to utilize online voting, the question remains whether this move will result in fewer or greater complaints associated with electing a community's board of directors.  Remember the national focus on the Sunshine State's unfortunate hanging chad incident? Hopefully, we will not have a repeat performance and our Florida communities will embrace this new option as one which will (a) likely increase voter participation and (b) reduce the possibility for voter fraud.

 

Tuesday, July 7, 2015

U.S. Supreme Court Ruling on Fair Housing Law Could Have Wide-Ranging Impact on Community Associations



The U.S. Supreme Court has been in the news a lot which is not surprising given its recent newsworthy rulings. However, there is one ruling that could impact the community association industry profoundly. The 5-4 Supreme Court holding in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, could have wide-ranging impact on community association boards. Previously, a board was diving into dangerous waters when it passed rules and restrictions with the intent to treat people differently. Under the new Supreme Court ruling, a board can be held liable for housing discrimination whether or not anyone on the board intended to discriminate so long as the rule or restriction has a disparate impact on a legally protected group of people.

Boards will have to show that (a) they had a good reason for the rule or restriction and (b) there was no way in which to accomplish their reasonable goal in a manner which had a less disparate impact. 

So how could this impact your community?

Many members wish to ensure the continued success of their community by regularly amending the documents. Often those amendments allow their boards to thoroughly screen new tenants and new purchasers to ensure that newcomers will not present a financial burden on association (if a member cannot pay assessments, the remaining members must make up the deficit) nor will they present a threat to the health, safety or welfare of the community.

Do the following restrictions which are fairly standard in the community association arena create disparate impact concerns?

-Screening applications which inquire about previous criminal background?

-Screening applications which inquire about credit score, employment status and other indicators of financial stability.

-Requirements that a new purchaser have a certain equity interest in the property being purchased.

-Rules involving access to an association's pool and other common areas that may impact families with children

While the ruling isn't a reason to panic or to abandon any attempt to pass and enforce reasonable rules in your community, it does make it more important than ever that you discuss your restrictions with your association attorney prior to implementing same in order to decide whether or not there will be a disparate impact and whether or not there is a way to accomplish your goals without creating a disparate impact.

The four dissenting justices voiced their concerns that the majority decision is based on the Griggs v. Duke Power Co. case rather than focusing on the actual intent and text of the Fair Housing Act. In the Griggs case, 401 U.S. 424 (1971), the Court held that black employees could recover from their employer under  Section 703(a)(2) of Title VII of the Civil Rights Act of 18-964 without proving that the employer's conduct (the employer required a high school diploma or a qualifying grade on a standardized test as a condition for certain jobs) was motivated by a discriminatory intent.

Disparate impact is a much different threshold than disparate intent.

To read the full decision click here:

http://www.supremecourt.gov/opinions/14pdf/13-1371_m64o.pdf

 

Tuesday, June 23, 2015

Has your Community ever assigned your post-loss claim or insurance policy benefits to a contractor? Two recent Court rulings uphold your right to do so.


In an opinion filed on June 22, 2015, the 1st DCA ruled in the case of Security First Insurance Company vs. State of Florida, Office of Insurance Regulation that the OIR was correct in not allowing Security First Insurance Company to change language in its policies which would restrict the ability of policyholders to assign policy rights without the insurer's approval.


This is the second ruling in little more than a month (the first ruling was issued by the 4th DCA) which has supported a policyholder practice known as an "assignment of benefits". This practice often occurs when a homeowner or an association hires a contractor to make necessary repairs in the aftermath of a hurricane, other storm or other casualty event such as a water leak. Once those policy benefits have been assigned, the contractor then pursues payment directly from the insurance company. Insurance companies have argued that the practice of assigning benefits can encourage inflated costs and fraud. Policyholders and contractors argue that the practice allows cash-strapped communities to recover more quickly from emergencies.


Security First attempted to change its policy language to the following:


“Assignment of this policy or any benefit or post-loss right will not be valid unless we give our written consent.”


On July 22, 2013, the Office of Insurance Regulation (OIR) denied Security First's request claiming that the change in language would “violate the intent and meaning of Sections 627.411(1)(a), 627.411(1)(b), and 627.411(1)(e), Florida Statutes[, and] contain[ed] language prohibiting the assignment of a post loss claim under the policy, which is contrary to Florida law.”


A three-judge panel of the appeals court said state law has long allowed assignments of insurance benefits.  "On this point we find an unbroken string of Florida cases over the past century holding that policyholders have the right to assign such claims without insurer consent." The 1st DCA Panel held that the matter of whether or not the practice of assignment of benefits should continue would be more properly addressed by the Florida Legislature.  In fact, Florida legislators considered a pair of bills (HB 669 and SB 1064) in the 2015 Session that would have substantially restricted assignments of benefits but both bills failed.


Not discussed in these cases was the more practical question of whether or not an assignment of benefits to a contractor is a wise decision for an association. Fortunately, we have not had a hurricane impact Florida significantly for more than a decade but in the aftermath of the tumultuous 2004-2005 storm seasons, we saw many out of state, unlicensed and unknown contractors arrive in communities at a time when they were most vulnerable. A Board's priority in the immediate aftermath of a disaster is to mitigate further damage. Negotiation on overall repairs requires deliberation, thoughtful negotiation and careful review of the contract. 
 
The moral of this blog post is just because you can do something does not necessarily mean you should.
 
 

 

Monday, June 8, 2015

12 Angry Men-Classic Movie or Average Association Master Board Meeting?


Last night I watched a classic American film-12 Angry Men. The title actually refers to the twelve jurors deliberating the fate of a boy on trial for murdering his father but could just as easily describe the average master association board of directors. 

I am sure many of my blog readers have seen this movie but for those who haven't, the entire film takes place in a hot, stuffy jury room. Henry Fonda starts out as the lone hold-out with his Not Guilty vote and he faces the wrath of his fellow jurors who want to get to a ball game, their jobs or their homes and do not appreciate his dissenting voice delaying their escape from their confined quarters.

At one point, a juror accuses Fonda of being talented at the "soft sell" negotiation technique. Fonda doesn't attempt to shout, scream or bully in order to get his fellow jurors to slow down in their rush to judgment. Instead, he bravely admits that he doesn't know whether or not the boy is guilty but he would like to talk about it a little and ask some questions before rendering a verdict which will end the boy's life. Eventually the discussion results in the other jurors realizing that the evidence they had relied on so heavily and hastily could not support a guilty verdict and an unanimous acquittal results.

While the decisions made in association board meetings are not nearly so significant, those decisions still can impact the quality of life for many people.   How often has a member of a community association board felt that the rationale being expressed by some or the majority of his or her fellow directors was not in the community's best interests but remained silent for fear of being rebuked or rejected? Conversely, how many directors do stand up and voice their concerns but do it in such a hostile manner that their message is drowned out by their rhetoric? Association members can also be the right messengers at times when a majority mindset needs to change.

There are a lot of lessons to be learned from 12 Angry Men for the many thousands of volunteers serving on community association boards. 

  • Speak up, especially if the stakes are high. 
  • Present your message in a way that makes your fellow directors really hear what you are saying. 
  • The way to unmask the extreme members of your board is by giving them enough room to do that task themselves in the face of unemotional data.
If you haven't seen the movie in a while or have never seen it, perhaps it's time for movie night in your community.

Monday, May 25, 2015

Florida shared ownership statutes continue to catch up with Digital Age

Given the significant percentage of Floridians living in all types of shared ownership communities, it is not surprising that each year we see at least a handful of bills pass which directly or indirectly impact those private residential communities and one primary association bill which contains both substantive changes and technical fixes needed to address glitches associated with the legislative changes from prior years.

2015 was no different. Florida's 60-day Legislative Session recently ended (and abruptly with the House adjourning several days early) with another omnibus association bill, HB 791, having passed; that bill is now on the Governor's desk awaiting his action. The Governor is likely to sign this bill into law and it will become effective on July 1, 2015.  


Among other changes, HB 791 will help Florida condominiums, cooperatives and homeowners' associations catch up with the digital age thanks to the following changes:
Electronic Voting (Condominiums, Cooperatives, & Homeowners' Associations): The
bill provides that associations may conduct elections and other membership votes by utilizing 
an electronic (interned-based) method. The bill also specifies the requirements necessary to 
establish an electronic voting method, including a board resolution.  The bill requires that an 
owner consent to online voting, and if the owner does not consent, the owner is entitled to 
vote by paper ballot. While it is certainly easier to cast your vote from the comfort of one's 
home or office, the real question here is whether or not communities are ready for this kind of
change and whether or not the typical complaints of election fraud will increase or 
decrease once voting online is implemented.
Digital or Electronic Transmission of Proxies (Condominiums, Cooperatives &
 Homeowners’ Associations): The current law does not specifically authorize owners to 
transmit a copy of their proxy to the association (for example, by fax or a scan of the proxy
sent via email).  The intent of this language is to facilitate voting.  Many owners are not able
to attend meetings in person and may wish to bypass U.S. mail and send their proxy to the 
association in some other fashion.  The proposed language is similar to language currently 
found in Section 607.0722(10), Florida Statutes, which governs corporations for-profit.  The
proposed language is being added to Section 617.0721, Florida Statutes, which governs 
corporations not-for-profit, and therefore, will also apply to condominium, cooperative, and 
homeowners' associations. It is important to remember that this change does not allow 
someone to simply send an email stating how he or she wishes to vote on a particular matter; 
it requires an owner to actually scan or fax his or her actual proxy. Also, this change does 
not allow directors to cast votes at board meetings by email. Still, this change is well
overdue-whatever can be done to make it easier and more cost-effective to relay one's vote 
should be permitted.
Electronic Notice to Owners (Condominiums, Cooperatives and Homeowners’
Associations):  Currently, in order to provide notice to owners electronically, an Association's
bylaws must provide for electronic notice and the owner must consent in writing.  The bill
removes the requirement that electronic notice be authorized by the bylaws which is a 
welcome change as some communities cannot easily amend their bylaws to include this 
language.  Therefore, as long as the owner consents in writing, the association can provide
the owner with electronic notice. Some ways to obtain such consent would be in the new
owner approval package and as a separate consent form included with
the annual meeting package. Speak to your association attorney about the easiest methods
to obtain this consent from your owners.
It is encouraging to see that our statutes are changing to address the way Florida's significant
shared ownership population actually lives and conducts business. Now that we've made it a
little easier for people to become involved in the voting process, let's hope the numbers increase in terms of those who actually do participate.