We are often asked if individual board members can be sued by members of the association. While the answer to that question is theoretically yes, board members are generally protected by various Florida laws. For this reason, it is rare that such actions are filed and rarer still that such actions succeed. That being said, because board members can be sued in their individual capacity they should be protected against such actions by the purchase of Directors and Officers Liability Insurance which is readily available to associations.
The recent case of Edmund Accari vs. Hillsboro Shores Improvement Association, Inc., is a case in point why such insurance should be obtained.
Mr. Accari owned a home in Pompano Beach which was located next to a lot owned by the Association. In order to protect the adjoining homes, that lot was made subject to specific deed restrictions limiting its use to an access way to the beach.
Mr. Accari felt that the Association was breaching the deed restrictions by placing picnic tables and grills on the lot, so he filed a series of three lawsuits against the Association. Because he felt that those suits and actions did not fully resolve the matter, he ultimately filed a fourth lawsuit against both the Association and the individual board members in which he claimed monetary damages.
As might be expected, the individual board members asked the court to remove them from the suit based on the protections granted to volunteer board members by Chapter 617. The lower court agreed with the board members and did dismiss them from the suit. However, on appeal, that decision was reversed and the suit was reinstated against the individual board members. In doing so, the appellate court made the following findings:
1. Section 617.0831(1) and other corporate statutes generally provide immunity to board members of not-for-profit corporations.
2. However, individual directors can be sued in cases of criminal activity, fraud, self-dealing or personal unjust enrichment.
3. Because Mr. Accari alleged in his complaint that the individual board members were unjustly enriched and had been involved in fraudulent activities, he technically met the above standards.
Based on those findings, the case was sent back to the lower court for a trial on those issues.
While we don’t know if Mr. Accari can prove his case, the individual board members obviously must still defend themselves at great cost. As volunteers, this cost should not come from their individual pockets.
For the above reasons it is our belief that all Associations should make sure that such insurance is in place for its directors. Because this article is a summary in nature, please contact your insurance professional to fully discuss this important protection.
The firm of Taylor & Carls, P.A., with offices located in Maitland, Melbourne, Tampa and Daytona Beach, Florida, was founded in 1981 and has practiced in the area of community association law since that date. This edition prepared by Robert L. Taylor, Esq. of Taylor & Carls, P.A. The information contained in The Association e-Lawyer should not be acted upon without professional legal advice.
©2005 Taylor & Carls, P.A. All Rights Reserved.
The firm can be reached at 407-660-1040.
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