Is HOA Insurer Obligated to Pay Attorney Fees of Owner Where HOA is Losing Party?

According to a recent, unpublished U.S. District Appellate Court decision (3/5/2015), the answer may be “Yes”.

At the trial court level, the HOA lost and was ordered to pay attorney fees of the homeowner. The Appellate Court ruled that the HOA’s insurance policy must cover such fees under the policy’s “wrongful acts” coverage. However, a Board must weigh the potential costs of submitting such a claim to the insurance (and possibly facing a premium increase) versus paying the owner’s attorney fees out of Association funds. Regardless of the Board’s decision, this case provides a useful discussion point when it finds itself on the losing end of a lawsuit.

The determination will be based upon the language found in the insurance policy. If you have questions or comments about this case, or your Association’s policy language, please post below.