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Parkside HOA gets sued for not insuring common areas

It's been almost three years since the Waldo Canyon Fire wiped out most of the 178 homes in Parkside at Mountain Shadows, along with sprinklers, fences, curbs, gutters and cul-de-sacs in common areas.

Within weeks of the fire, resident Terry Rector discovered the homeowners association had failed to insure those areas, in violation of Parkside's covenants ("Neighborhood dissociation," News, Aug. 15, 2012). Rector was furious, because he didn't think residents should get stuck with a special assessment for the damage, but they did — $1,700 each in 2013. So he and eight other residents filed suit last year against the HOA board and its then-manager, Chuck Fowler.

Both the plaintiffs and the board now agree that the board goofed and that Travelers Insurance should make good on a policy that covers such mistakes. Travelers didn't return a phone call seeking comment, but attorney Hans Tuft, who represents the plaintiffs, says the company has refused to fix the damage. "They're trying to get out of it any way they can," he says.

The Waldo fire destroyed more than 340 homes in Colorado Springs, including 141 in Parkside, an enclave with small lots and shared common areas. When Rector raised the insurance question, he says, Fowler first claimed the insurance policy burned in the fire; then he said the HOA didn't own anything. Faced with an assessor's list of 23 HOA-owned cul-de-sacs, Fowler finally said insurance had been too costly.

The board has since levied the special assessment to pay for some repairs, but Tuft says the biggest cost, up to $1 million or more, will be replacing concrete sidewalks, curbs, gutters and asphalt cul-de-sacs — installed just a year or two before the Waldo fire. "The life span of that concrete is way less because it got so hot," he says, noting curbs are crumbling.

Since the fire, the HOA board has insured the common areas, but the policy limit is $26,000, says Rector. Parkside resident Don Meaney attended a January HOA meeting where the board asked members to vote on three coverage options. The cheapest policy, with a premium of $127 a year, or 6 cents per month per owner, has a policy limit of $26,400. The most expensive, at $9,440 a year or $4.42 per month per owner, would pay up to $833,800. "That's a coffee latte," says Meaney, referring to the high-end policy.

But Parkside's covenants require a quorum of homeowners to decide, and a quorum didn't show up at the meeting, Meaney says. Hammersmith Management, which now manages the HOA, didn't return a phone call seeking comment on whether there will be another vote.

The board's attorney, Lenard Rioth, declined to comment on pending litigation. But in a court document, the board cited the Travelers policy, which began in July 2011 and covered "wrongful acts," which include "any error, misstatement, misleading statement, act, omission, neglect, or breach of duty committed ... by the insured organization or by one or more insured persons ..." The policy also covered such wrongful acts of a manager.

In a Nov. 25, 2014, letter to the board, Travelers denies the claim and cites a policy exclusion dealing with construction defects — which would seem to have no bearing on the current situation.

Tuft says his clients want to recover the special assessment for all residents and force Travelers to pay for the additional damage. "Our intent," he says, "is not to stick the individual volunteer board members with the bill."

  • Parkside HOA gets sued for not insuring common areas

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