A recent case decision, Mt. Hawley Insurance Company v. Aquasol Condominium Association, Inc.,1 should have all association board members, condominium property managers, and condominium general counsel asking their insurance agents what will happen if their own association members sue the association. A recent case says there is no coverage for the cost to defend the suit and no coverage for the property damages to which the association may be liable.

The association was sued by a member whose property sustained damage due to Hurricane Irma. The association retained companies to fix the damage. Those companies allegedly damaged property and failed to remediate mold.

The condominium had a liability policy with an “Association Members Cross Liability Exclusion” which provided:

This endorsement modifies insurance provided under the following:

COMMERCIAL GENERAL LIABILITY COVERAGE FORM. This insurance does not apply to “property damage” or “personal and advertising injury” for any claim or “suit” made by or brought on behalf of an “association member” against any Insured including, but not limited to any “employee” or “executive officer” of the Named Insured or any other “association member.”

For purpose of this endorsement, “association member” means an owner or member of the homeowners or condominium owners association identified on the Declarations as the Named Insured.

The court held there was no coverage for defense costs nor indemnification.

There is no ambiguity in the policy provision here. The Cross Liability Exclusion clearly states that ‘any claim or suit made by or brought on behalf of an ‘association member’ against any Insured …’ is not covered by the policy….An ‘association member’ is defined as ‘an owner or member of the homeowners or condominium owners association.’ …Davidson is an owner and member of the condominium association because of her ownership at Aquasol….The underlying property damage lawsuit was brought by Davidson, an owner, against the insured…

….Accordingly, because there is no genuine issue of material fact that the underlying complaint is by an association member against an insured, and the Court finds there is no ambiguity in the Cross Liability Exclusion, Mt. Hawley has no duty to defend Aquasol.

The above analysis precludes any discussion on the duty to indemnify. Where there is no duty to defend, there is no duty to indemnify….Because the duty to indemnify is narrower than the duty to defend, there can be no duty to indemnify if there is no duty to defend.

There are many times Association members sue the Association for damages to their property. It is a pretty common risk that an association may do something which could subject its mistakes to such lawsuits. Yet, there is no coverage if your association policy has such an exclusion. Check the coverage language and ask your agent what can be done if your policy has such an exclusion.
1 Mt. Hawley Ins. Co. v. Aquasol Condominium Assoc., No. 18-24692, 2019 WL 3387054 (S.D.Fla. 2019).