Kevin Davis: 0:00

Yeah, it's okay to be inefficient, okay? It's okay to make mistakes, okay? It's okay. You got to do the best job you can do and go, guess what? I have an insurance policy the day I come, the day I am sued, as long as I did my job as a fiduciary of the Community Association. I'm relaxed, I feel good. And then by one more thing, by feeling good, guess what's happening now? I'm not agitated as much as they are.

Announcer: HOA Insights: 0:30

Common Sense for Common Areas, exists to help all 2 million volunteer board members nationwide have the right information at the right time to make the right decisions for their future. This podcast is sponsored by for companies that care about board members, association insights and marketplace, association reserves, community financials, and Kevin Davis Insurance Services. You'll find links to their websites and social media in the show notes.

Robert Nordlund: 1:00

Hi, I'm Robert Nordlund of association reserves, and

Kevin Davis: 1:03

I'm Kevin Davis of Kevin Davis Insurance Services. And this is HOA Insights, where we promote common sense for

Robert Nordlund: 1:09

common areas. Well, welcome to episode number 70, where we're again speaking with insurance expert and regular co host, Kevin Davis about the impossible goal of doing everything exactly right. Humans aren't perfect and volunteers aren't perfect, so serving as a board member isn't going to have perfect results. So the question is, how imperfect is good enough? What expectations should you have, and what does an insurance company look for? Well, this is a follow up to episode number 69 where we spoke with Jim Hopkins, one of our board member heroes, talking about his leadership. That is huge, and I mean huge Association, huge in size and huge in budget. Well, if you missed that episode or any other prior episode, take a moment after today's program to listen from our podcast website, Hoa insights.org, or watch on our YouTube channel, and, better yet, subscribe from any of the major podcast platforms so you don't miss any future episodes. Those of you watching on YouTube can see that I have an HOA insights board member mug here that I got from our merch store, which you can browse through from our HOA insights.org website or the link in our show notes, and you'll find we have specialty items like this and free board member zoom backgrounds. And as a treat, I'll give this mug away, free to the 10th person to email podcast@reservestudy.com mentioning episode 70 mug giveaway. Give us your address, and after you visit the merch store, tell us which mug you'd like, and 10th person we'll send them a mug. Well, we enjoy hearing from you responding to the issues you are facing at your association. So if you have a hot topic, a crazy story, or a question you'd like us to address. You can contact us at 805-203-3130, or email us at podcast@reservestudy.com now one of those listener questions prompted today's episode, we had Brian from San Diego wrote in saying we missed advanced notification of our monthly board meeting by two days. Our monthly financials are sometimes a few days late. Our meeting minutes sometimes need to be corrected, and sometimes we get casual at a board meeting. How much of a problem is that? Does that significantly affect our board member liability? Is there any consideration for us being volunteers? Well, Kevin, that's a great question, and I'm glad you're here to help us answer that today. Yeah,

Kevin Davis: 3:49

and that this really is a good question, because first of all, he said, We're significant there. Significant isn't significant there. And the problem is this, it's not a matter of significant liability. It's a matter of you just want the board to be efficient. This sounds like Brian is kind of upset because the board lack efficiency. Okay? And guess what? There's no perfection out there. You know, there's no way we can get all the rules and regulations correctly. So you you want to strive for just to be the best board member you can be now, here's Brian's really issue right now, there's anxiety in our community, association world, lots and lots of anxiety. There's a lot of people out there who just think the board is not doing the things they wanted me to do, and they want the board to be held accountable, even if they are doing a good job, even they are doing the best job they can do. It's all boils down to anxiety that we've been talking about probably for a year now that there's a lot of energy out there that's that's not positive energy. I don't use the word negative, because in that direction,

Robert Nordlund: 4:54

you talked about lowering the temperature, slowing things down, telling people to relax. Things like that. It's okay if it rained and the lawn didn't get mowed on Wednesday, it'll get mowed next week. Just you're talking about letting the insignificant things go, yes,

Kevin Davis: 5:11

and right now, more than ever, you have these things going. Because what's there's one thing that's happened over the past four years that has changed the way we look at community associations. That is, we are home. It's, you know, nine o'clock here, right? And I'm home, you're home, right? And so I have people walking past my window like for the past 10 minutes. You know, I don't know if it's they, know, the landscaper out there, or just somebody helping out around the house, but there's distractions, and distraction causes me anxiety, not living in a home. But can you imagine living in community association nine o'clock and all of a sudden there's a landscape out there, trimming, you know, just mowing the lawn, you know, or or doing things that they normally do, and we just see a lot of things. So it's awareness, you know, we just happen to be people who live in these community associations are more aware now that it has been and that creates this anxiety. Yeah,

Robert Nordlund: 6:05

there's noise. There's new noises. Used to be quiet during the day, and maybe there's kids up and down the hallway in a condo, or there's kids outside playing at a town home Association.

Kevin Davis: 6:17

Yeah, it's summertime, and so at summertime, that means we're going to hear more noise that we heard maybe last year. People are more comfortable now being outside and being in the community, and so you're going to see, just think, those kids are actually seeing things they haven't seen before. And this is guess what's happening? We're in an election year, okay? An election year brings out the signs, you know? And when those signs come out, guess what happened? It creates more anxiety, not just because you may be one versus the other, but you're one signs being out there. You don't want to see the signs. You don't want to be a neighborhood. You want political conversation right now, there's just a lot of anxiety out there. And again, you said it in beginning. We have to just lower the temperature so Brian, out there, it's okay, we're not efficient right now. Okay, it's okay. Don't worry about being efficient. You got to worry about treating it as a business. You know, I guess one thing we've been saying for a while, Robert, is that you are a volunteer member of a community association. So is this a business for you, or is it something you get in to talk about? Guess what's new on Netflix, guess what? Or the Olympics were great. You know, Olympics, we just finished the Olympics, and are we going to spend time in our board meeting talking about Olympics? Or, I'm talking about, you know, the board of directors meeting being timely, or getting the budget out and timely manner, you know, all those things that are really necessary to really to have a really well run and efficient organization, that's all we want. Efficiency,

Robert Nordlund: 7:44

yeah, okay, all right, well, you helped with the big answer, right there. But help me and help our audience talk through. You started out saying significance. You talk about what's significant, what's not significant, and making sure that we don't have board members worrying about efficiency, but where do you get to the point where it's right versus wrong? Are there administrative things? I'm thinking board meeting notifications, the Roberts Rules of Order, meeting minutes, things like that. Are those trivia insignificant, or are those indeed, legal documents that we need to be really careful about.

Kevin Davis: 8:25

This is the problem with this conversation, and I hate to go in this direction. We have to Yes, and that's why I started with efficient and not efficient. Is that you want to be efficient, because if you're not efficient, or even if you are efficient, you could be sued. You know, I'm not a lawyer, but what we do is we pay a lot of lawyers a lot of times in these lawsuits that we see. Okay? Now all we do is to as a liability insurance specialist, the lawsuit comes in, and we're paying the lawyers to protect the individual board of directors. The problem is, there's a lot of lawyers out there. There's 1.3 million lawyers in the United States of America. And these guys are hungry, and they're becoming specialists. And as specialists, all they're doing is targeting things they know they can win. And in Community Association, you have volunteer board members who, guess what, who are not efficient. And if they're not efficient, guess what happens? They're ripe for a lawsuit, okay? And that's what we see when that lawsuit comes in. Because, guess what, they were two days late for the board meeting, minutes or two days late for the budget, or two days late for whatever it is. The problem is that you got these unit owners who are agitated right now, and they will say, guess what, you're two days late. And then they start going and going and going to the point where that's it. I can't handle anymore. The board is incompetent. Now, a sudden you cross that magical line there, yeah,

Robert Nordlund: 9:53

where we start the line talking about efficiency and inefficiency, and then that turns into a claim of. In competency, when again, we're talking about volunteer board members who are the goodness of their heart or love for their community, spending their own time to try to help, and last thing they want is to get, get or make trouble. So it sounds like what you're saying is do what you can to build community so there's less of a chance that people will feel that agitation.

Kevin Davis: 10:27

Yes, and you hit the nail on the head here. The agitation comes from the union owners there who are at home. I'm home during the day, and guess what else I see things and I don't like again, I see political signs I don't like. I see the landscaper there who's not doing a job as much too. And I see, guess what? I'm getting budget amounts of money. I'm getting numbers that say they want more money from me than they did before. They want more money. Why they want more money? Now we know that the budget may have been the same for years. Assessors may have been the same for years. Now, all of a sudden we know all the association has to increase their budgets, right? But I'm looking here and saying, wait a minute, increasing my budgets. But guess what's happening? I'm not getting services that I want, that I'm used to getting, I'm used to having. So now I'm agitated. I'm upset, and I got the board packet two days later than I should have. I got the minutes later and I should have, you know, the budget is late, so now all of a sudden, I'm more agitated than I have been before. And you put that along with the lawyers who really want to make more money, you see the ads on TV every 10 minutes.

Robert Nordlund: 11:30

Oh yeah, the personal injury now, personal injury lawyers make up a wonderful section of the world. They own homes and community associations, and they're making a living like we're making a living, but you're right. There are those opportunities, but I think we can nip the problem in the bud if we're building community. And actually we should talk about that with Julie sometime in an upcoming podcast about community aspects while you're here with us today, let's talk about what does an insurance company look for? Obviously, you don't want to get embroiled with something really expensive. I feel like I'm getting in dangerous territory here, because you may want to write someone a minimum check and say, go away. The board's okay. This is not a big problem,

Kevin Davis: 12:26

but that's what it is, Robert, that's the issue right now. Okay, from an insurance point of view, when these legal liability lawsuits come in and it could be something just as simple as the three things that Brian's concerned about, I could. I'm an entity union owner who's home at 10 o'clock in the afternoon, and I'm looking and seeing that the board is inefficient. And so I'm going to challenge the board. I'm challenging because they're inefficient. Now I'm not going to call them incompetent. I'm going to call them that data violation of either state statute or just the documents, because the board should be able to get this thing done in a timely manner. They're not. So now what happens is this, the board is a little inefficient. They not expect it to be perfect. So you have a lawsuit. The judge going to say these magic words, I understand, Robert, you're agitated, but how are you harmed? What damages have been done? And now you Robert going to say, well, put the you know, but they have to get this thing done two days ahead. They're that's not efficient as I want them to be. Well, sir, how will you harm them? How will you how Association damage for those two extra days? And that's what happens. That's why I'm saying there. It's not a matter of being efficient and perfect. It's a matter of understanding that as a board of directors, you have a fiduciary responsibility to act in the best interest of the association, and when you act in the best interest of the association, you're doing your job properly. Guess what? You're going to have those anxious unit owners, anxious homeowners out there who's saying, guess what? I don't like the job that they're doing. They raise the assessments. They have a special assessment. I can't believe it. And you know how agitated they get, and then all of a sudden they want to challenge the board's authority to pass a special assessment, challenge the board's authority to have an assessment, and all of a sudden, down the board get sued. Now poor Brian's there is looking at this lawsuit and saying he gets agitated, and then it gets worse. Yeah, right. Here's the message to you, okay, ready? Brian, it's okay to be inefficient, okay? It's okay to make mistakes. Okay, it's okay. You got to do the best job you can do and go, guess what? I have an insurance policy the day I come, the day I am sued, as long as I did my job as a fiduciary of the Community Association. I'm relaxed. I feel good. And then by one more thing, by feeling good, guess what's happening now I'm not agitated as much as they are. I get a chance to sit down. I get to listen. I hear the agitated homeowner. I have a choice now. I can. Listen to Him and guess what? I heard you, Robert, I heard you're agitated because the assessments have gone up. But let me explain to you why you have auto don't you? You have auto insurance policy. You're paying a little bit more than you did last year, haven't you? Yes, I did. Well, guess what? The electric and gas is a little bit higher than it was. Yes, yes. Well, that's the reason why our assessments are going up. So what we just did was just bring it down, because I'm not agitated, because I know if I do my job correctly and I'm being sued, I should have insurance available. Now, one thing is important, to make sure that you do have somebody who understands Community Association insurance that's handling your insurance, not a brother in law or friend or somebody who gets you the cheapest policy that's out there. Have an insurance professional who understands community associations. And then guess what, Ryan, you can relax a little bit. Yeah.

Robert Nordlund: 15:57

And when you relax as a leader that communicates relaxation, and that, in your words, lowers the temperature around the association. You said some great things there, and I want to follow up on those. But at this point in time, we want to take a quick break to hear from one of our generous sponsors, after which we'll be right back with more HOA insights.

Paige Daniels: 16:21

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Robert Nordlund: 16:52

and we're back. Well, during the break Kevin and I were talking, and I think we both had in the back of our mind, when Kevin was talking about the pressure and the reality to raise assessments. I was thinking, if you're going to raise assessments, don't get a new car. Because we were both thinking about the old Seinfeld episode. Where at I think it was Del Boca Vista.

Kevin Davis: 17:14

Del Boca Vista, yes, where I think it was?

Robert Nordlund: 17:18

Was it Jerry's dad? There was this accused. Jerry gave him a his career was doing well. He gave him a gift of a Cadillac. Yet Jerry's dad was on the board, and with the increase in assessments, they all thought that Jerry's dad was stealing from the Association and buying a car with it. Well, that's, that's entertainment, but those ideas come, they have a basis in reality. So yes, it's really

Kevin Davis: 17:41

it's a true story that actually happened. I wrote the insurance for Boca del Vista. It was another name for academia, homeless Association in Florida, and Jerry's dad was there. So it was actually a true story. I don't know about the Kramer party, who took over the board, but the reality is this, is that these are the things happen all the time. Is that you raise the assessments, you want a special assessment, and you see a board member or the manager company with a new car, and the first thing comes to our mind is, guess what they're doing? They're getting kickbacks. They're stealing from us. I want to see the budget. I want to see the finances. And then that's when that line gets crossed. Okay? The line gets crossed when you say, I'm stealing from you, you're incompetent. Then all of a sudden, now, that raises the bar to now, all of a sudden, this defamation, and that's what we want to avoid. We want to avoid these things where now a sudden, those 1.3 million lawyers are out there are getting happy, because there's a difference of saying, how were you harmed because they were two days late, versus how were you harmed because you call somebody incompetent or a theft. Two different situations. There two different scenarios. One is worth millions of dollars, the other one is worth zero.

Robert Nordlund: 18:50

Got it? Okay, you talked about the board of director, fiduciary responsibility. I want to check a word that you said there. You said, the board wants to raise assessments. I would say that needs to be the board needs to raise assessments. And then there's that communication side where you want to be transparent, you want to have the budget, you clear to everyone. Maybe you post it, maybe speaking on a turn here, on the bulletin board, on the door to the garage, on the website, yeah. Social media. Social media, yeah, yeah. Make sure that, and maybe you neutralize it enough so that you can say, come to the board meeting on Tuesday next week for more details. But boy, everything you can do to show that, hey, we're volunteers, working hard for the association, and here in our association, and we'll call it Del Boca Vista for the purpose of this conversation, we are trying to take good care of our place here, our place here. It's my place. It's your place. We are neighbors here

Kevin Davis: 19:54

and communicate that I get. That's why it's so important for Brian to say, hey. What we're not we can do a better job, and let's focus on doing a better job for the betterment of the community. Association, with minimum anxiety, don't worry about don't get overly concerned about it. But we have one job. We want to make sure that the assessments are being collected properly. We make sure we have a bright budget. We will make sure we're enforcing the rules. We maintain the association if we're doing that job correctly, guess what? We have peace of mind. We have that ease, that comfort, and long as we project that ease and comfort, everything else will fall in place. Why don't care about that angry homeowner who's saying that you're doing all these things that are should be done better. Don't go to his level, he'll stay and say, Guess what? We are doing the job of managing this association. We're doing our job. We understand that we have a fiduciary responsibility, and we're maintaining the job in the best way. We can keep that temperature low, and they can yell and scream, but at the end of the day, all you want is a judge to say, Sir Madam, how will you harm? And then the thing goes away with no money out of your pocket, and association is not really harmed. That's that's the end game you want in all these associations, In all these situations.

Robert Nordlund: 21:15

Down again, something you said earlier, and I wrote it down here, when your temperature as a board member is low enough, because, you know, you've been doing the right things. And the three things you were talking about financial stability, the assessments are where they need to be. The rules are being enforced and the property is being maintained. When you're doing those three building blocks, you can take a breath and you can take the time, and now you're always going to have some I think I can say this annoying homeowners. There's always going to be a few percentage points that should live in a trailer out in the desert that aren't made for Community Association, living in close quarters. But you can take the time to say, you know you're right. Our notification was two days late, but I went out of town. I was on the river with my boat, with my kids, and yes, I'm late, and I'm sorry. It can be, can it be as simple as that?

Kevin Davis: 22:11

It can be as simple as that also too. Yeah, the other unit owners there, who are not the bad guy, but they just happen to read every document that you have. You have these technicians that reads the documents and knows every state law that did, they have one job to say, I'm here to help you to make sure you do your job correctly. And guess what? You in violation of Civil Code 19 65.3 I just, oh, the worst part about I just went to a CI seminar, oh, they told me to do these four or five different things. And guess what? Board of directors, you're not doing all four or five of those things. And again, our natural heads thing, as a board member, is to say, is to fight. It is the target. Well, we just learned about the EpiPen, both the elevators, you know, don't get elevated because you don't know everything. You don't know the new civil laws have been passed. You don't know about the balcony, or what's happening in Florida, or what's happening in a new reserve study loss. You don't have to know it all. All you want to do is just not get too panicking. Don't get anxious when that homeowner came who just saw that dude went online and saw that lawyers, you know, top three thing reason why Association gets sued. Yeah, it happens to me. There's a lot of anxiety today in

Robert Nordlund: 23:22

community associations. Well, yeah, and I'm thinking, I've the kind of calls I get are, what about this? I just heard this, and I said, Well, actually, that's the new law in New Jersey, but you live in Texas, and they, Oh, I didn't know that, because it was a online webinar, or it was online article, and we have to be real careful with people who are and we'll call them good natured people who are trying to help. But hopefully, as a board member, you have the time, you, as a manager, had the time to say, you know, you're right. We appreciate that. But that's New Jersey. That's Florida, that's California, that's Washington, that's Hawaii. Whatever it is here in California, the law is and, or here in Utah, the law is and having that time to lower the temperature and communicate well, and again, have that person who is anxious. Your words anxious. Okay, can we do a little bit of quick stuff. What's the difference between missing an internal document requirement like a notification and being late on your tax filing, something government? Oh,

Kevin Davis: 24:34

again, what these things are all boiled down to this simple thing, okay, if I'm a board member, there's certain things I have to do, okay? And we're going to forget them. And the perfect example, really, is the state laws. There are a lot of state laws coming out. There's a corporate Transparency Act that that mandates you have to do certain things, and we don't understand it. We're not going to understand it, okay, a long time, forget it. But right now, every Association probably is in violation of the corporate. Transparency Act, and when it comes into play, when it starts, we're all going to be in violation of it. And guess what? Do we get worried about it? We have to do our best job we can, to understand it and do our job. Because again, it goes back to All right, I'm a unit owner, and guess what? I heard about the corporate Transparency Act? And board of directors, you haven't complied with corporate Transparency Act, and it goes back to the same thing. Guess what? We don't understand the corporate Transparency Act. The manager, we try to get information on it. So give us time. We'll do it. No, no, no. And now the lawsuits there, and that judge will say, Sir, how were you harmed? The board of directors is doing their job. They're doing their job. They are looking into it, trying to understand it, and when they will, they will do their job. Now, if they say, We don't care about the corporate Transparency Act, we're not going to do it because we think it's, you know, the government doesn't have the right to do it's unconstitutional. Now you have a ball now you have a different ball game. Now you're talking about millions of dollars and defending it, because I want to prove it's unconstitutional. And guess how much money that's gonna cost to go to Supreme Court to show that the corporate Transparency Act in my association, because I'm Brian and my I'm the president my association, I refuse to do it because unconstitutional, and that we're both laughing, but we all know that somewhere along the line, we're going to read about it in The New York Times, the Wall Street Journal, and the community association is going to refuse to do it because they believe it's unconstitutional. And guess what's going to happen? They're going to be sued by every unit owner, and it's going to create exactly it's going

Robert Nordlund: 26:29

to explode on them. Okay, Kevin, I still have a whole list of questions here. Maybe we'll do this in a another month or so. Otherwise, it's going to turn into a really long podcast. I'm savoring what you said, if you're collecting the assessments, if you're running the association, you're enforcing rules and order in the association, if you're taking care of maintenance, those are such incredible building blocks. And then you also said earlier, you have fiduciary responsibility to the association. And I think of that when I've gone to a legal seminar, I hear of the business judgment rule where you want to show duty of care, where you're caring for the needs of the association, duty of loyalty, where you are thinking of the needs of the association. You're loyal to the association before your own and duty of inquiry, so looking for help when you don't know there's these, these major building blocks that hopefully keep you on safe ground is that is that it's

Kevin Davis: 27:33

called the prudent man rule, you know. Okay? It's you know, something that we can't call it that these days, but it's the prudent man rule, as long as you act responsibly. Okay with the duty of care. That's what your job is. You you can't be held to a higher standard than everybody else you're hired. You stand into that, that one standard a prudent man and the business judgment rule applies to you. But again, if you breach your fiduciary duty, I mean, you're going to be challenged by every unit owner. You're going to go, guess what? You have a fiduciary responsibility. You're going to breach it. I'm going to sue you for I am doing my job. I'm enforcing the rules, okay? I'm taking care of the finances, and I maintain the association, and I'm going to relax, but I have a insurance policy, okay? And I talked to these community association specialists out there who said that, guess what? Your insurance policy picks up these kind of situations. Now it may not pick up everything, but what you want to make sure it picks up is that I'm a board member, and if I'm sued, is that picks it up or not? Yeah, and that's the key thing. I'm a board of directors. I want to make sure I have directors and officers liability insurance that protects me when I'm sued for any type of act out there, for things that I'm making, decisions that's all my job is to make decisions daily. And I know people out there don't like decisions I made. I want protection for that. Yeah, if you got that, you can be take us, Brian, you can be a lot happier. Yeah,

Robert Nordlund: 29:00

well, I think we came where I wanted to come because I didn't want to raise the anxiety of our listeners in dealing with this episode here. But I think we're able to say that everything's going to be okay, that perfection is unattainable, but if you're pursuing the major building blocks and having insurance to cover those gaps, because perfection is not attainable. Everything is going to be okay. And I like coming to that place where we here are able to say, you can take a breath, lower the temperature, it's going to be all right if you're if you're doing the big things, because some little things are going to slip through the cracks. Well, thank you, Kevin, as always, it's a pleasure for me to be able to take time with you. It's fun. Any closing thoughts to add at this time?

Kevin Davis: 29:49

You know what? Going back to Brian's, you know efficiency. We want to do the best job we can do, and just do the best job you can do. And enjoy your community association. Enjoy. Way it, it doesn't have to be the battle that we're making it out to be, because at the end of the day, a judgment to say, how will you harm, sir? And you're going to look and go, guess what? He's the bad guy. I'm the good guy because I did my job. And you can walk out to the pool and you can smile on your face, because guess what, the judge is basically saying he wasted the court's time. You know because I did my job correctly, that's all you want to do. Don't worry about being sued if you do your job in the best way you can do it. Fantastic.

Robert Nordlund: 30:29

I like that summary. Well, we hope you learned some HOA insights from our discussion today that helps you bring common sense to your common areas. We look forward to having you join us for another great episode next week

Announcer: 30:44

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