ASSOCIATION AND INDIVIDUAL DIRECTORS SUED BY MEMBERS FOR FAILURE TO PURCHASE FIRE INSURANCE IN AN AMOUNT REQUIRED BY THE BYLAWS

This case pertains to an action filed by a group of condominium owners (“Owners”) against their homeowner’s association (“Association”) and certain of its individual directors (“Individual Directors”) based on claims that Association’s board of directors failed to procure the proper amount of insurance on their condominium structure that was severely damaged by a fire that occurred in 2019. Owners contended that Association’s bylaws provided that Association’s Board of Directors was required to maintain fire insurance equal to not less than 80% of the full replacement cost of the building. Owners alleged that, notwithstanding the fact that the replacement value of the building ranged from $25,200,000 to $26,880,000, meaning the Association should have had at least $20,160,000 in coverage, the Board of Directors had only obtained insurance coverage of $13,700,000.

In their lawsuit, Owners initially alleged that Association’s Board of Directors breached the bylaws by failing to purchase sufficient fire insurance in 2018 and sought damages equal to the shortfall of at least $6,460,000. After the initial filing, Owners sought leave to amend their complaint to: (1) assert their claim for breach of contract as a derivative claim on behalf of all unit owners; (2) add a second cause of action for breach of fiduciary duty against Individual Directors, who had allegedly obtained the deficient insurance coverage; and (3):