Legal Question in Real Estate Law in California

Re: Hoa

It depends upon the terms of your management agreement, but even if the management agreement delegates the authority to do so, the Board may be breaching its duty to the members of the HOA by having delegated that decision to the Management Company in the first place.

So, two questions -

First, did the Board delegate to the Management Company the authority to change insurance carriers in the management agreement. If so, the Management Company probably did nothing wrong, but the Board may have. If the management agreement did not specifically delegate that authority, then the Management Company has breached is agreement with the HOA.

Second, if the Board did delegate this authority, the question becomes was that a breach of its duty to the members. The answer probably depends upon the extent of the delegation of authority. If the delegation was unconditional - the Management Company can change insurance carriers without any regard for cost, carrier admission in the State of California, their rating, etc... then I think a great argument could be made that the Board has breached its duty to the members, if the change has resulted in harm to the HOA. If there has been no harm to the HOA, then even though the Board may have breached their duty, what are the damages? Finally, if the delegation of authority was conditioned upon a series of explicit qualifications (must be an A or better rated carrier, must be admitted in the State of California, must match or beat existing cost for identical or better coverage), then I think the Board probably has a good argument that they have not breached their duty to the members as they put sufficient safeguards in place to protect the homeowners. As you can see, your question is not simple, and is dependent upon a large number of facts, so you need to review all of the facts with an attorney before you can say yes or no to the foregoing.

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