Playground Liability
Q. Our HOA is considering installing a playground at a cost of $25,000. We need to have a vote of the homeowners to have an assessment to pay for it. Some owners don’t think we need it and are trying to get votes byraising the issue of liablility for injuries that could occur. Our insurance company, after reviewing the playground design, has informed us that the extra cost will be $100 per year. The questions that are being raised now pertain to what happens if a liability judgment is obtained against the HOA that exceeds the liability insurance? Is the HOA (and thus the homeowners) responsible for raising the additional funds? Are homeowners at risk of losing their homes in such an instance?
A. The installation of a playground is predictably controversial but seems appropriate if the community has a significant number of families with children. The cost at $25,000 seems reasonable to us. Your question focuses on what happens if a judgment is obtained by a person injured by the equipment you are installing and that judgment exceeds your insurance coverage. First, you should inquire of your insurance advisor as to the amount of insurance you should have based on claims histories relative to play areas and risk analysis on these facilities done by insurance company risk experts. You should then get that advice in writing for your minutes of your meeting where you discuss it. Once obtained, you should follow that advice.
Be mindful that the amount claimed in an injury suit is rarely the amount awarded as a judgment. Most such cases are settled within the insurance policy limits. If a judgment does exceed the policy limits then the Association's assets are at risk - this would mean the association's bank accounts and any real estate (in the case of a homeowners association) and tangible personal property owned by it. The judgment would not run to the individual lot owners in that they do not own the land on which the equipment is situated (in the case of an HOA) - so they are not at risk. The board members are not liable personally in that they have statutory protection under the Virginia Nonstock Corporation Act unless their actions constitute willful misconduct or a knowing violation of the criminal law.
In conclusion, there is no avoiding risk in almost everything we do, the key is to minimize it and try to calculate it before we take it. The playground should be a project that any community in which it will be used by many residents can undertake with minimal risk to the Association’s assets.