Board Members Had Immunity in Individual Liability Lawsuit

May 18, 2017
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Although serving on the board of an association is a voluntary duty, unfortunately it can result in board members being sued. An association should do its best to shield board members from individual liability, though. A recent Texas appeals court ruling is an example of a situation where things ended well for board members who were being sued. There, a court determined that the board members, who were being sued by homeowners in a community that had been demolished, weren’t liable.

A hurricane and a fire caused significant damage to many homes in a planned community. The city where it was located found that the community was “substantially damaged,” which required that it could be repaired only if it were brought into compliance with the city’s then-current building codes. However, the community wasn’t repaired and the city declared that the buildings constituted substandard housing and a public nuisance. The city ordered the association to obtain either a permit to repair to code or a permit to demolish the community. A fire caused additional damage, and the association obtained a demolition permit from the city. The community was demolished.

Prior to the actual demolition, a group of six current or former unit owners who wanted the community restored to its pre-hurricane condition sued the association and several current and former members of the board in their individual capacities. The individual board members asked a trial court for a ruling in their favor without a trial. They argued that the unit owners had not asserted claims that would support personal liability. Additionally, the board members asserted that they were immune from personal liability under the Texas Charitable Immunity and Liability Act.

The trial court dismissed all claims against the individual board members. The owners appealed.

The owners contended that the trial court erred when it granted a traditional summary judgment in favor of the board members for two reasons: (1) the trial court mistakenly concluded that each board member was entitled to statutory immunity; and (2) there were genuine issues as to the existence and breach of certain applicable standards of care governing the actions and omissions of each board member.

The owners asserted that the law doesn’t apply, because the claims at issue are brought by members of the association against its board, and the act “does not limit or modify the duties or liabilities of a member of the board of directors or an officer to the organization or its members and shareholders.”

The appeals court explained that the law was enacted to limit the liability of charitable organizations and immunize volunteers who meet certain conditions. Under the law, and subject to exceptions, “a volunteer of a charitable organization is immune from civil liability for any act or omission resulting in death, damage, or injury, if the volunteer was acting in the course and scope of the volunteer’s duties or functions, including as an officer, director, or trustee within the organization.” The law defines “charitable organization” to include a homeowners association and “volunteer” to mean “a person rendering service for or on behalf of a charitable organization who does not receive compensation in excess of reimbursement for expenses incurred.”

The board members asserted that they were immune from liability because they were volunteers rendering services for the association when the incidents—that is, the hurricane and fire—giving rise to the owners’ lawsuit occurred. There’s no dispute that the homeowners association qualified as a charitable organization and that the board members were volunteers serving either as current or former directors on the board of the association, determined the appeals court. Therefore, it upheld the decision of the lower court [Brown v. Hensley, January 2017].

This particular decision ended well for the association’s board members, in large part because the state of Texas provides statutory immunity for these types of organizations and volunteers. As always, check with your association’s attorney before taking any actions involving property in the community you manage to make sure that a similar type of immunity would apply to your board members in the event that the city of your planned community determines that structures in it must be demolished.