Community Association To-Dos: Carry Insurance and Conduct Routine Inspections and Maintenance
$20 Million Verdict Against HOA Counsels that There is More to
Litigation Avoidance Than Purchasing Liability Insurance.
Performing routine inspections and maintenance of common areas and
certain amenities is a good idea ‒ just ask the Las Vegas homeowners
association that recently got pummeled by a $20 million verdict in a
personal injury action.
In Thompson v. Lamplight Village at Centennial Spring Homeowners Assn.,
the teenage plaintiff sat down on one of the swings in the
association’s playground when the overhanging forty-pound cross bar gave
way and allegedly crushed the left side of the boy’s head, resulting in
a long-term brain injury. The jury in that case awarded $10
million for the boy’s “pain and suffering” and an additional $10 million
in punitive damages.
The association carried a liability policy with total
limits of $2 million, meaning that, after the insurance company pays its
share, the HOA's individual members are subject to an $18 million
special assessment ‒ or about $80,000 per household before all is said
The first lesson from the Lamplighter case is the wisdom of the association carrying a liability policy to cover just such events. (A separate Legal Moment
article on “directors and officers” insurance is forthcoming.)
Putting amenities like playgrounds aside, in the mountains it is all too
easy to imagine guests of owners slipping off the side of a mountain on
account of the poor conditions of the road, among other foreseeable
Under both North Carolina’s Planned Community and Condominium Acts, insurance is mandatory to the extent such policies are “reasonably available.” See § 47C-3-113 in the Condominium Act and the corresponding provision § 47F-3-113
in the PCA. (Notably, the PCA’s insurance requirement is not
among those that apply to homeowner associations formed prior to 1999 so
older communities may be more vulnerable.) If insurance is not
“reasonably available” ‒ read, the premium is too expensive ‒ the
association must inform its membership of that fact, ostensibly to allow
the members to purchase their own comprehensive general liability
The second lesson from Lamplighter is the
importance of performing routine inspections and maintenance.
Beyond the breath-taking size of the verdict, the most remarkable aspect
of the Lamplighter case is the fact that half of the verdict
was an award of punitive damages. This suggests that the jury was
very displeased with the revelation that the failing cross bar was not
just theoretically foreseeable but that the association had actual and
repeated notice that the cross bar was a problem. Allegedly, there
had been four previous incidents involving the cross bar prior to the
teenager’s injury. While the association took corrective steps as
to those incidents, it repeatedly declined to purchase an inspection
plan by the swing set maintenance company for $150/month ‒ 50 cents per
month per owner ‒ as too costly.
To put that preventative cost in perspective, as the jury
undoubtedly did, the association spent $50,000 on landscaping and nearly
$80,000 on general maintenance in a single year. It also had half
a million dollars in its bank accounts. So, the jury might have
concluded, lack of money was not a real obstacle and the boy's lifelong
injury therefore avoidable but for the HOA's callousness.
Lamplighter is admittedly an extreme example of
what can go wrong but it does provide a cautionary tale as to carrying
appropriate insurance and conducting routine inspection and maintenance
of the association’s common elements and amenities.
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