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Do You Know The Risks?

Cooperative/ Condominium, Board Of Directors, Take The Test & See.

Here’s a challenge. Test your knowledge. See answers below.	TRUE	FALSE
Is the board of director’s authority set forth in the articles of incorporation?
Original by-laws cannot be amended to reflect the changing needs of the association.
The procedures for amending the by-laws require a unanimous vote of the association membership.
The procedures set forth in the by-laws are only advisory and need not be followed.
A Not For Profit community association is not held to the same standard as a For Profit board of  directors.
The board of directors is only responsible for claims asserting monetary damages.
The board of directors are required to adhere to all rules promulgated by the hired property manager.
The board of directors and its association members are immune for liability if they took action pursuant to the advice of an attorney.
The board of directors cannot be sued if the property management company fires or harasses an association employee.
The board of directors cannot be sued for making the wrong decision regarding what insurance to procure for the association, or the amount of limits as long as some type of insurance is purchased.
The board of directors cannot be sued for breach of contract by a third party vendor.
The board of directors, the association, or association volunteers can not be sued for libel or slander based on things put in an association newsletter or on an association web page.
The board of directors can be sued for a claim by an association member for interference with right of quiet enjoyment of the member’s property.
A board cannot be sued for more than $1 million for a board’s mistake.
If the board of directors has insufficient limits of liability, the association members cannot be held responsible for a judgment in excess of the purchased insurance limits, and no assessment can be issued for the uncovered amount.

How many answers did you get right?

Answers: 1.) False, 2.) False, 3.) False, 4.) False, 5.) False, 6.) False, 7.) False, 8.) False, 9.) False, 10.) False, 11.) False, 12.) False, 13.) True, 14.) False

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• Insurance Brokers/Attorneys/Accountants
• Have each attend a board meeting each year to provide advice and guidance

• The Council of New York Cooperatives & Condominiums
• The Federation of NY Housing Cooperatives
• The CNYC Educational Conference (November)
• Federation Conference &Seminars
• Habitat Magazine & Educational Conference
• The Cooperator Newspaper & Expo
• All of the above are resources for advice, guidance and references

• 70% of all D&O lawsuits are lodged in New York, New Jersey, Florida, and California
• 65% of all coops and condos in New York City know of a situation that could lead to a suit against the board.
• A suit against the Board naming each Director places that person in financial jeopardy because their personal assets are at stake.
• All lawsuits must be defended regardless of merit and legal expenses are very costly.
• Legal expenses for discrimination lawsuits range from $100,000 to $500,000.
• Many D&O suits are not for monetary damages!!
• Court requests are made for “Injunctive Relief and Declaratory Judgment”, yet still must be defended.
• Most common D&O lawsuits involve allegations of: Wrongful Termination; Discrimination (Race, Religion, And Employment); Defamation Of Character; Breach Of Contract; Renovations; Noise; Subleasing; Pets
• Quality of coverage is paramount
• Management Firm needs to be insured under the contract

• Homeowners Insurance will provide protection to restore and rebuild the unit as well as providing protection for the cost to replace their personal property.
• The extra expenses incurred by the owner and his/her family during the time of restoration to live elsewhere may also be covered under Homeowners Insurance.
• Homeowners Insurance will provide protection against being sued by the cooperative, other shareholders, or their insurance companies for damages caused by their negligence
• As well as providing protection against the cost of being assessed by the cooperative due to a claim that exceeds the coop’s coverage.

• Emergency lighting
• Hardwired or battery operated smoke detectors in common areas
• Locked entrances & exits
• Sidewalks & walkways in excellent condition
• Elevators, gyms, laundry rooms
• Local Law 10 and 11 Compliance
• Panic bars to roof

• Update from fuses to circuit breakers/the number one cause of fires
• Change to  “S” fuses in units in the interim
• Plumbing updates – Must be systematic on all pre-war buildings
• Burst pipes will become an increasing problem
• Clean AC drain lines & pans to keep your building from becoming a sponge

• Obtain Certificates of Insurance naming the Cooperative or Condominium  Association as an Additional Insured under their insurance each year.

• No insurance equates to no entry into the building
• New York Law places almost total liability on the building owners
• Shareholder/Unitowners obtain certificates naming both the unitowner and   the coop/condo as Additional Insured’s under the contractor’s insurance.
• Contractors must provide proof of insurance for General Liability with Products Liability & Completed Operations Coverage.
• Contractor must provide Certificate of Workers Compensation
• Specific language (Hold Harmless Agreement) for cooperative and condominium should be obtained on the certificate from the contractor.
• Larger jobs require owners protective policy & bonding

• Every 3 years is a good rule of thumb unless large (30%) increase is pending.
• Make sure a full comparison of both coverages and premium are provided.
• Adequate coverage for Replacement Cost on the building and contents with Loss Of Income for one year.
• Be aware of important supplemental coverages such as Broad Form Water/Sewer Backup, Building Ordinance, etc.
• Workers Compensation, NYS Disability, Building Systems (Boiler, Etc),
• Commercial Umbrella, Crime and Environmental Coverage are in effect.
• Raising deductibles can be a source of premium savings
• Management Firm named on the Liability Section of the coop/condo and Directors & Officers Liability.

• Provide for reimbursement by the cooperative or condominium to Board Members for uninsured D&O legal expenses incurred.
• Your Management Firm has an Indemnification Clause with Cooperatives &
• Condo’s so why not protect each member of the board in the same fashion?
• Most Indemnification Clauses (Drafted many years ago) should be reviewed again in light of today’s climate in the cooperative & condominium atmosphere.

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For more information, please contact Edward J. Mackoul at 1-866-MACKOUL or by email ejmackoul@mackoul.com..

Mackoul & Associates, Inc.
214 West Park Avenue
Long Beach, NY, 11561
Phone: (515) 431-9100
Fax:     (516) 431-4641

E-Mail: info@mackoul.com