In Waltz v. Tanager Estates Homeowner’s Association, Division III of the Washington Court of Appeals addressed a lawsuit brought by homeowners, the Waltzes, against their Homeowners Association (“HOA”) and individual members of the Board of the HOA. 332 Wn. App. 85, 332 P.3d 1133 (August 19, 2014). The Waltzes sought to remodel their home, but their remodeling plans were rejected by the HOA Board. The Waltzes brought suit against the HOA and the individual Board members. The trial court found that the Board members were not grossly negligent in the performance of their duties and, thus, were not liable to the Waltzes. The Waltzes appealed.
Division III of the Washington Court of Appeals relied upon a Washington statute applicable to nonprofit corporations, RCW 4.24.264. Under this statute, except for suits against directors or officers of a nonprofit corporation by the corporation or its members, directors and officers are not individually liable for any discretionary decision unless the decision constitutes “gross negligence.” In this case, the Court found that the gross negligence standard did not apply to suits by the Waltzes against the individual Board members. In other words, if the Board members were merely negligent, they were liable to the homeowners. Accordingly, the Court reversed the trial court’s decision.
Comment: This Court of Appeals opinion is significant, as it also applies to suits against Board members of many different associations that are set up as nonprofit corporations, including those set up for condominium associations. Board members of such associations must be aware that they are liable for ordinary negligence to association members if they fail to act in a reasonable, non-negligent manner. As a result, prudence would dictate that such associations always obtain insurance to cover the liability of individual Board members under such circumstances.