Members of our board and the board itself are being unfairly sued. What do we do?
“Boards and individual board members may get sued—often in the same lawsuit—but it doesn’t mean you are liable for anything or that you have done anything wrong, just because you’ve made decisions as part of your role on a co-op or condo board,” says New York City real estate attorney Steven Wagner, a partner at Adam Leitman Bailey, P.C. who represents co-op and condo boards and owners.
The business judgment rule protects co-op and condo boards and individual board members who are carrying out their duties in the usual course of business. This might include decisions made when approving a contract, deciding to change a vendor, or committing to landscaping or interior decorating.
When you are served with a summons and complaint, you need to immediately notify your managing agent, your lawyer, and your insurance company. Even though the board and any named individual in the lawsuit may have not done anything wrong, there are time periods within which to respond to a lawsuit. And the case will still need to be defended. “Being served with a lawsuit is quite different from losing a lawsuit,” Wagner says.
If the co-op has insurance, which is very likely that the insurance company will almost always provide a defense for the co-op or condo and the board members. The insurance will also cover losses within the scope of the policy.