Illinois Law on Defenses for Officers and Directors of LLCs or Corporations Who Face a Lawsuit

Officers and Directors of HOA or Condo Association Officers or Directors in Illinois, you should consider the following in defending themselves from lawsuits:

1. Limitations on the Association’s Representative Capacity: The Illinois Condominium Property Act restricts a condominium association’s representation of its unit owners to matters involving the common elements or more than one unit. This implies that the Association cannot seek legal remedies for damages caused to individual unit owners’ property.
2. Unit Owners’ Right to Sue: Unit owners in a condominium association in Illinois can bring a derivative breach of fiduciary duty action against former directors. However, causes of action for conversion and common law constructive fraud relating to an association’s account belong exclusively to the association.
3. Fiduciary Duties: Directors can face lawsuits for breaching their fiduciary duties, such as treating the unit owners with care, loyalty, and good faith.
4. Role of Insurance: Insurance policies for Condo Associations often include both general liability and directors and officers (“D & O”) liability coverage. The specifics of the policy could influence the defense strategy.
5. Disclosures related to Property Sales: The Condominium Property Act, which mandates certain documents to be made available to a purchaser, creates a private right of action. This could potentially involve directors if they were involved in non-disclosure or misrepresentation during a property sale.
6. Indemnification Provisions: The approach to defense could involve scrutiny of any indemnification provisions in relevant contracts. For instance, the HOA’s claims against a condominium developer for breach of warranty and breach of implied warranty of habitability fell within the scope of an indemnification provision of the construction contract between the developer and the roofing contractor.
7. Scope of Responsibility: In cases where the HOA files a lawsuit against a developer, the roles and responsibilities of the officers or directors should be examined carefully as it may impact the defense strategy.
8. Powers and Duties of the Board of Managers: The board exercises all powers, duties, and authority vested in the association by law or the condominium instruments, except for such powers, duties, and authority reserved by law to the association members [4].
9. Nature of Damages: In some instances, damages related only to diminished value and economic harm, such as repair or replacement of defective work, may not fall within the definition of property damage under an insurance policy’s language.

By taking these points into account, a comprehensive defense strategy can be formulated.

Don’t defend your HOA or Condo Association Officer or Director decisions and actions by yourself or with inexperienced legal counsel. Let us the Illinois Officer and Director Defense Attorneys at Lubin Austermuehle – The Business Litigators — be your trusted advisers in protect your residential community and your elected position as a board leader or officer. Contact us today for a confidential consultation online or at 630-333-0333.