Loose Lips Sink Ships:

What can Directors say when there is a Claim or Lawsuit?

Many Directors have questions about what they can say and who they can speak to about a claim or actual lawsuit. They understand there is a fine line be­tween preserving the confidentiality that such actions require while maintaining the “open book” nature of associations and do not want to inadver­tently cross it. While not all inclusive, what follows is a guide of who the Directors can speak to and what they can say.

Members/Owners

  • Entitled to know:
    • A claim/lawsuit exists.
    • The facts surrounding the claim/lawsuit.
    • Anything that is public record (e.g., that is available at the Courthouse, assuming an active lawsuit).
  • Should not be told/provided Attorney-client privileged ma­terials (e.g., communications regarding the claim and its in­vestigation, settlement discussions, plans of action) to avoid waiving the privilege or providing the opposing party with the Association’s legal strategy for handling the claim/litigation.
    • Paraphrasing/summarizing an Attorney-client communica­tion could waive the privilege also.
    • When in doubt let the Association’s Attorney explain the spe­cific (non-privileged) items which can be discussed.

Association’s Attorney

  • All communications are privileged.
  • Tell the Attorney everything about the claim/litigation, under­lying facts, and possible evidence (both good and bad),

Association’s Insurance Agent

  • Advise them of any claim against the Association so they can file a claim and demand coverage from your carrier.
  • Advise them of the facts surrounding the claim.
  • Be very careful not to divulge Attorney-client communica­tions which are privileged. When in doubt, have them speak to the Association Attorney.

Association’s Insurance Carrier (Claims Handler)

  • Treat similarly to the Association’s Attorney.
  • If in doubt, include Association’s Attorney in the discussions as it can help to clear up questions specific to the Associa­tion’s governing documents and particular aspects of asso­ciation law which pertain to the claim.

Association’s Insurance Attorney (Attorney assigned by Insurance Carrier to defend claim)

  • Duty is to the Association.
  • All communications are privileged.
  • Treat them like you would the Association’s Attorney but when in doubt talk to the Association Attorney and let them guide Association.

Opposing party (Person(s) filing claims or against whom claims are filed)

  • There is no rule prohibiting the actual parties to a claim/litigation from speaking to each other about the claim/litigation.
  • Not recommended that these conversations take place because:
    • You could inadvertently disclose privileged communi­cations or legal strategy.
    • You could make admissions against interest. In other words statements that can be used against the As­sociation in the case.
    • You could enter into agreements which are not legal or otherwise fail to adequately protect the interests of the Association.
    • You could waive coverage by your insurance carrier who has offered representation in the claim.

 

Opposing Party’s Attorney

  • Never speak to the Attorney without the Association’s Attorney or the Association’s Insurance Attorney pres­ent.
  • Despite appearances this person is “not” your friend.
    • The most innocuous question asked (by the Oppos­ing Party’s Attorney or even the Director seeking clari­fication) could result in disclosure of information that would hurt the Association.
    • You could inadvertently disclose privileged communi­cations or legal strategy.
    • You could make admissions against interest.
  • If this person ever contacts the Association (its Directors, employees or agents) immediately advise them that the Association is represented by counsel and that all com­munication should be through that Attorney.
    • Provide them the contact information for that Attorney.
    • Contact the Attorney representing the Association in the matter and let them know.

Opposing Party’s Insurance Agent

  • Same as if speaking to the Opposing Party’s Attorney.

Opposing Party’s Insurance Carrier (Claims Handler)

  • Same as if speaking to the Opposing Party’s Attorney.

Opposing Party’s Insurance Attorney (Attorney as­signed by Insurance Carrier to defend claim)

  • Same as if speaking to the Opposing Party’s Attorney.

“Ask The Experts” Articles have been Reprinted with permission from the Charlotte Observer

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