A recent Broward County negligent security lawsuit filed on
August 31st raises issues about who should pay the consequences when a
security breach results in a resident's death. In this case, a community with
an entrance feature protected by a 24-hour guard and security cameras became
vulnerable to entry when a perimeter fence was not properly maintained. An
intruder with a decade-long rap sheet entered the upscale Davie community and
fatally stabbed a resident. The multimillion dollar lawsuit was filed against
the community's management company and security company but not the
association. The initial reaction from the volunteer board of directors may
have been relief to not have been named in the lawsuit until someone reminded
them that they likely agreed to broadly indemnify both the management company
and the security company in their contracts.
This blog post addresses provisions in existing service
contracts which require the association to be financially responsible if its
vendor’s negligent actions cause damage to a third party. As it is typical for
boards to agree to provide broad indemnification in management, security and
elevator contracts, in the negligent security case discussed above, it is
likely that the management company and/or security company will file third
party claims against the association to enforce the terms of those
indemnification provisions.
While agreeing to an indemnification clause is often a cost
of doing business these days, these provisions should not be treated as harmless
boilerplate. Indemnification clauses must be carefully considered and discussed
with legal counsel prior to agreeing to same. Moreover, the association must
contact its insurance agent to confirm whether or not its current insurance
policy will cover such clauses or if additional coverage is required. Most
indemnification clauses will require that the vendor be added as an additional
insured to the association's policy and the association's policy will be
treated as the primary coverage for any claims even if the vendor has
sufficient coverage to address its own negligence.
In the case of an onsite manager, that individual really is
an extension of the board so it is reasonable for the association to indemnify
him or her for actions taken at the board's request and with their direction.
However, consider the case of a woman trapped in an elevator who sues the
elevator company for negligent maintenance which resulted in her entrapment and
injuries. The elevator company was hired to perform regular maintenance and
repairs on the association's elevators. Neither the volunteer board members nor
the association manager have the skill or expertise to determine when repairs
and maintenance must be performed nor how to perform those functions, hence the
need to hire an elevator expert. With a broad indemnification clause in place,
however, the elevator company can avoid liability for all but the most
egregious actions which typically must rise to the level of gross negligence or
willful misconduct.
In a contractual setting, a fair indemnification provision
should be reciprocal (meaning the contractor or vendor agrees to protect the
association in addition to the association protecting them) and should be based
on the party causing the harm being the party responsible for fixing it.
No comments:
Post a Comment