Guard Yourself From Lawsuits Against Your HOA

Your homeowners association, or HOA, could be sued because of its crime watch program. There are steps you can take to protect your HOA and your own pocketbook from a lawsuit.

Regardless of the outcome of criminal charges filed against George Zimmerman for the killing of Trayvon Martin in Sanford, Fla., the HOA where the shooting occurred could be subject to a civil lawsuit. Lawsuits can drain the financial resources of associations and can even require special assessments to pay for legal expenses. In this way, homeowners can be held responsible for the actions of their neighbors.

If you live in a community with a homeowners association, legal experts recommend that you review the Neighborhood Watch program rules and check on the HOA's liability insurance coverage.

News reports on the Zimmerman case have said that he was designated by his HOA as a "captain" of the community's neighborhood watch program.

"It is quite unusual to have a resident listed as a security contact," says Allen Warren, an attorney with Chadwick, Washington, Moriarty, Elmore & Bunn in Fairfax, Va. "It's more common to rely on local law enforcement for security. HOAs should never give the impression they are providing security for residents."

Warren says it is best if a neighborhood watch or crime watch program is coordinated with the local police department and is not a designated HOA committee.

"When a community wants to set up a volunteer crime watch system, I encourage it, but I highly recommend that they have a community liaison officer from the local police or sheriff's office come in to train the volunteers," says Ellen Hirsch de Haan, a partner and attorney with Becker & Poliakoff in Clearwater, Fla., and past president of the Community Associations Institute. "The crime watch group must have written instructions, the first of which should be to call 911 and to not intervene in any situation."

Hirsch de Haan says that written guidelines must be distributed to all volunteers and to the community at large. The rules should prohibit carrying a weapon while on neighborhood watch duty.

"If the volunteer overstepped the guidelines, the HOA is in much better shape legally if the guidelines are in written form," Hirsch de Haan says.

Warren says: "Volunteers should be told their only role should be to observe and report. They should be told not to engage in any action other than calling 911 and reporting what they have seen to the local police."

If an HOA's officers want security beyond resident observation and local law enforcement, Warren suggests hiring a professional security firm because a contract would offer greater liability protection for the HOA.

Insurance Protection

Every HOA should have appropriate liability insurance coverage, experts say.

"HOAs generally carry commercial liability insurance coverage that protects the HOA's liability," Warren says. "That insurance policy may or may not also cover the board of directors and volunteers on an HOA committee. Residents should ask their HOA if they are covered under the HOA's liability policy when they are volunteering for the association."

Most insurance policies exclude criminal activity from liability protection, Warren says. If an HOA volunteer is convicted of a crime, the liability insurance will not cover any costs.

Individuals should have their own liability insurance that covers them when something happens on their own property or when they are acting on their own.

If the HOA in Zimmerman's neighborhood is successfully sued, the impact on homeowners depends on the size of the award and the details of the HOA's insurance policy.

"If an award is larger than the insurance coverage, then the HOA could impose a special assessment on all the homeowners to pay for the lawsuit," Hirsch de Haan says.

As long as HOAs are clear in their directions for volunteers, defer to local law enforcement and have adequate insurance coverage, Hirsch de Haan says crime watch committees can have a positive impact on a community.

Copyright 2012, Bankrate Inc.