For residents of Arizona condominiums or cooperatives the question of suing a condo board member personally may arise. The complexity of this issue hinges on factors such as the board member’s conduct, relevant laws and available protections. This blog post aims to explore the circumstances under which Arizona condo board members might face personal liability and how they can mitigate potential legal challenges.
Fiduciary duties
Condo board members in Arizona are entrusted with fiduciary duties to act in the association’s best interest and its members. Violations of their various fiduciary duties can bring personal liability.
First, there is the duty of care. Board members must be informed, reasonable and communicative, familiarizing themselves with governing documents like covenants, conditions and restrictions and conduct thorough research before making decisions.
Second is the duty of loyalty. Board members are obligated to act on behalf of the condo community, avoiding conflicts of interest and refraining from actions that prioritize personal interests over the community’s welfare.
Finally, there is the duty to act within the scope of their authority. Board members must adhere to governing documents and state laws while exercising their authority. Violation of these fiduciary duties may result in personal liability, subjecting the board member to legal action.
Personal liability
Arizona condo board members can be sued personally under certain conditions, primarily involving negligence, willful misconduct, bad faith, fraud, criminal activity or self-dealing/unjust enrichment. Instances such as embezzlement, fraudulent contracts or violations of the Arizona Condominium Act may lead to personal liability.
However, not every mistake or disagreement exposes a board member to personal liability. Actions conducted in good faith, with reasonable care and within the scope of authority may be protected by legal defenses.
Mitigation
To reduce the risk of personal liability, Arizona condo board members can take proactive steps. Most importantly, comply with the condo governing documents. Adhering to the governing documents and Arizona statutes helps board members avoid breaching their duty to act within their authority and ensures they respect the rights and obligations of the association and its members.
Insurance coverage
Obtaining sufficient insurance coverage for both the board members and the condo association provides financial protection against lawsuits. Insurance policies may cover legal fees, settlements or judgments resulting from claims against the board member or the association, although exclusions or limitations may apply.
Indemnification
Board members facing personal lawsuits may seek indemnification from the condo association, wherein the association reimburses legal expenses or pays damages. Indemnification may be outlined in governing documents, but its availability could depend on the circumstances and the board member’s conduct. In conclusion, proactive measures such as compliance with the governing documents, insurance coverage and indemnification can significantly mitigate those risks.