HOA Insurer Must Pay Association’s Liability for Attorney Fees as the Losing Party

UNPUBLISHED U.S. District Appellate Court decision (March 5, 2015).

Topic: Insurance / Dispute Resolution

In this case, a homeowners association (HOA) sued two homeowners for alleged violations of the HOA’s bylaws. The lawsuits were initiated under Florida statutes that contain provisions which provide for an award of attorney fees to the prevailing party. The homeowners successfully defended the actions filed by the HOA and the homeowners were awarded attorney fees. The HOA then sought to have their liability insurance carrier indemnify the HOA for the attorney fee judgments. The insurance carrier denied coverage for the attorney fees. The trial court granted summary judgment in favor of he insurance carrier and the HOA appealed.

The insurance policy in question provided liability coverage for a loss incurred by the HOA during the policy period as a result of a “Wrongful Act.” The subject policy defined “wrong act” as “any error, misstatement, misleading statement, act, omission, neglect, or breach of duty” committed by the insured HOA.

On review, the appellate court found that the lawsuits that were filed against the homeowners qualified as “wrongful acts” under the definition contained in the policy. As a result, the judgment against the HOA for attorney fees constituted losses suffered by the HOA that were covered under the insurance policy. Accordingly, the trial court decision was reversed by the appellate court and the insurance carrier was obligated to pay the judgment against the HOA for attorney fees.

See case decision: Culbreath_Isles_Prop._Owners