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HCCA – Almost Free Legal Advice November 14, 2013 WHY BOARDS GET SUED

HCCA – Almost Free Legal Advice November 14, 2013 WHY BOARDS GET SUED. Presented by Milton M. Motooka Motooka & Yamamoto . INTRODUCTION. CLAIMS ON DIRECTORS’ & OFFICERS’ INSURANCE. The most frequent claims filed under Directors’ and Officers’ Liability Insurance are as follows :

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HCCA – Almost Free Legal Advice November 14, 2013 WHY BOARDS GET SUED

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  1. HCCA – Almost Free Legal AdviceNovember 14, 2013WHY BOARDS GET SUED Presented by Milton M. Motooka Motooka & Yamamoto

  2. INTRODUCTION

  3. CLAIMS ON DIRECTORS’ & OFFICERS’ INSURANCE The most frequent claims filed under Directors’ and Officers’ Liability Insurance are as follows: Discrimination Breach of governing documents Wrongful termination Breach of contract Failure to properly reserve funds Libel, slander, & defamation of character Conflict of interest Failure to collect assessments Improper payments Breach of loyalty

  4. THE FUNCTION OF THE BOARD

  5. DUTIES OF DIRECTORS AS BOARD MEMBERS • Familiarity with project’s legal documents • Declaration • By-laws • House rules

  6. Fiduciary duty of directors (section 514b-106, Hawaii revised statutes) • Duty of obedience • Duty of diligence or due care Major renovation project: • assemble the project team • investigate the contractors before selecting them • Hire the appropriate experts • Penny wise pound foolish – cheaper is not always better • Make sure contractors are bidding apples to apples • Warranties are crucial • Communication is crucial to the success of the project • Consider increasing d & o insurance coverage prior to commencing the project

  7. Duty of loyalty- avoid conflicts of interest • Duty of good faith

  8. Rule making and the enforcement of rules • Reason for rules • Tips for rule making • Avoid selective enforcement

  9. Delegation of authority not responsibility • Business judgment rule • What is the business judgment rule? • What is the effect of the business judgment rule?

  10. Financial management • Collection of maintenance fees and special assessments • Maintaining financial records • Fidelity bond requirements (section 514-b-143(3), Hawaii revised statutes) • Annual audits (section 514b-150, Hawaii revised statutes) • Tax returns

  11. Budgeting and assessments • Reserves (section 514b-148, Hawaii revised statutes) • Investment of association funds (section 514b-149, Hawaii revised statutes)

  12. DEALING WITH DIFFICULT OWNERS TO AVOID LAW SUITS • Communicate with owner/tenant and determine what the issues are • Mediate the dispute if necessary • Arbitrate the dispute if mediation fails

  13. Thank you! Motooka & Yamamoto, LLLC MYHawaiiLaw.com Client Services: 532-7240 Help Line (Collections): 532-7246

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