Cost of E & O insurance

[sutcac]

The 2002 "right to repair" law has started to ease this very bad situation in the condo market and some E&O carriers are starting to respond. Mine allows me to do a certain percentage of them in any given year. I did a six-unit one two years ago but it has never gotten built. Just didn't pencil-out once we finally got Planning approval, and partially due to the dip in real-estate.

Here's a good article-

http://www.triallawyersinc.com/ca/ca03.html

Hopefully this will turn around, as I think we desperately need more affordable housing in CA.

[Richard Park]

Allen;

Can everyone say it together; "Class Action Lawsuit". My insurance carrier forbids me from having anything to do with "multi-unit projects". This is because of the possibility of two or more homeowners getting together over coffee one morning and deciding that the stair treads are spaced 1/8" to much for comfort and contacting a lawyer who will rally everyone in the complex to the same consensus, and sue the designer, builder, developer, roofer (yes, they name EVERYONE, .

You don't even need the owners to think it up. In Florida (at least years ago) there were (are?) law firms that made presentations to condo associations informing them how much money they could collect by suing the builder, developer and anyone who set foot on the project. And they list 'problems' rather they are real or not. You have to prove that they are not!

Dick

[James A]

On multi- family, where the probable lawsuit will come from a homeowners assoc. complaining about hairline stucco cracks etc, a developer I know does the following:
Architect and developer both form LLCs under their corporations and conduct all work through these LLCs and dissolve them at completion of each multifamily project.
All engineering consutants have contracts with developers LLC and not with architect. Most lawsuits are aimed at the structural engineer.
I have not done this but I reviewed it with several attorneys and they all said it is the best protection possible.

[perryh]

Richard
Apparently you don't know a thing about l.l.c.'s. To pierce the Vail you must prove fraud. Negligence is only for compensatory damages. I,m glad your not my lawyer. The best thing is to just not put yourself in that position. I,m done with this, as some people need to ask any good lawyer with l.l.c. experience.

[RMorrison]

Richard
Apparently you don't know a thing about l.l.c.'s. To pierce the Vail you must prove fraud. Negligence is only for compensatory damages. I,m glad your not my lawyer. The best thing is to just not put yourself in that position. I,m done with this, as some people need to ask any good lawyer with l.l.c. experience.

I'm glad I'm not your lawyer, too! Here, you can get an education: http://www.limitedliabilitycompanyce...liability.html
It's written by an attorney, so you don't have to take MY word for it

or, http://www.zlc.net/PDF/ZLC%20spring%202005.pdf (see page 2 under "Incorporation".)

[perryh]

Lew
No meetings is right, you better check it out with someone who knows. Ive had mine for about 15 years with no meetings here in california.

[Ben Palmer]

Great links, thanks Richard.

[lbuttery]

No meetings is rig

Perry:

I understand that you aren't having meetings but that's the point. Without observing business formalities you open yourself to having the courts "piercing the veil".

I found these references with a quick google search:

http://www.mmmlaw.com/publications/a...3&articleid=37

http://www.easybusinesslaw.com/artic...erce_corp_veil

http://www.weissandassoc.com/article...liability.html

Other than the occurrence of fraud, courts normally consider three criteria in determining whether to pierce the corporate veil:

inadequate capitalization,
failure to adhere to corporate formalities, and
abuse of the corporate entity so as to amount to complete dominance by the shareholders.

Fox, 62 Geo. Wash. L. Rev. 1154. Most courts rely on some combination of factors in deciding whether to pierce the veil or maintain shareholder limited liability. Id. It is likely all three will be applied, in varying degrees to LLCs and LLPs.


Disregard as Separate Entity. The last factor of the corporate piercing doctrine that may be applied to LLCs and LLPs is whether the entity is operated as a separate entity or if it is the alter ego of its owner(s). This encompasses such things as maintaining separate bank accounts, keeping separate personal and business funds, keeping separate books, etc. If the entity’s separate identity is not respected through commingling of assets or the like, the risk of piercing of the veil is increased. Note that after the "Check-the-Box" regulations and the proliferation of "disregarded entities" for tax purposes, the risk that appropriate records will not be maintained increases substantially for such entities.



You need to find yourself another lawyer



Lew

[perryh]

Decisions to Date. No court has yet pierced the veil of an LLC or LLP in Georgia. In other jurisdictions, a federal district court interpreting Louisiana law has held that the veil of a LLC may be pierced if a LLC is operating as an alter ego of its members or if the LLC members were committing fraud or deceit on third parties through the LLC. Hollowell v. Orleans Regional Hospital, 1998 U.S. Dist. Lexis 8184. In another case, the Eighth Circuit refused to pierce the veil of an LLC because it found no element of injustice or unfairness existed that necessitated the piercing of the veil of limited liability. Gallinger v. North Star Hospital Mutual Assurance, Ltd., 64 F.3d 422 (8th Cir. 1995). Both of these courts applied factors that are used to justify piercing the veil of a corporation.


Lew
This was taken from your own source. Case closed, you lose. Get a life.

[lbuttery]

Perry:

If your going to get snotty then this discussion is over

good luck

Lew

[alobartn]

Hey guys, and especially Perry. The purpose of this forum is to disseminate helpful information to Chief users. Not to argue, although healthy debate can produce positive results. Being "right" gets you nowhere. Who cares if you "win"? Let's keep it civil. As someone's father used to say, Don't make me come over there!"

[WendyWelton]

Allen,

"...class action lawsuit..." - yep, therein lies the rub.

Condos are high risk because the end user is not only an emotional homeowner, but an entire committee of them. That's before you add predatory lawyers to the mix. And yes, once somebody decides to let the dogs out, they let them all out and sick them on everybody. It's called "mud against the wall" or the "scatter suit".

Adam,

Yes please, and thank you.

All,

I have a new tactic for dealing with childish behavior - absolutely no response whatsoever. Let anybody who's talking trash talk to themselves.

Lew,

I may not agree with everything you say, but I appreciate that you're always a gentleman here and always keep an open mind. Keep up the good work.

[Allen Brown]

Lew,

I may not agree with everything you say, but I appreciate that you're always a gentleman here and always keep an open mind. Keep up the good work.

I'd like to second that, and add that I have seen many a day when Lew will go online to find some obscure fact and post it here to help someone.

Also Perry, I have seen many threads much like this one, that many people have weighed in on (myself included), and although incorrect assumptions are made, there is enough collective minds on this forum that we will almost always get to the point where many of us learned something we did not know before. And if you go back and read Lew's comments, I can assure you he was not attacking you, but trying to help.

[perryh]

Adam

Come on over I,m 6' 7" and 300 lbs. Ex pro basketball player in Europe long time ago. Glad I learned something in college. I'm just trying to give good advice because of my extensive experience with this. It might be different in your state. Just don't confuse a corp. with an l.l.c partnership.

[WendyWelton]

Draw4Food,

What's your name?

"I hereby say a curse upon Wendy's legal antagonists." Huh? I'm not creating the news, merely reporting it. I'm not trying to throw a wet blanket on anybody's party, I'm trying to educate so that others might avoid the fire that somebody then wants to put out with a wet blanket.

The problem with limiting liability to fees paid is that it only applies to your original client. The big liability with condos is that they are then sold. The purchasers are not a party to the original contract, and the limit does not apply unless the builder writes it into each sales contracts (yeah, right, like that's gonna happen - and like the RE agents won't bounce that clause real fast). Worse, your one client, who's "in the business" - knowledgeable about quality standards and such, then morphs into a dozen or more, who are that perfect storm of uneducated (about construction realities), emotional (about their homes) and worst of all, a committee.

If you're going to do condos, and you don't have insurance - a limit on liability will do you no good. A clause that has the builder "release, indemnify and hold harmless" your company will. Indemnify means the developer pays your legal fees for whatever occurences are specified in the contract. Definately, absolutely get an attorney to write that contract. Oh, and vet the developer to make sure he has insurance that would kick in.

Then of course there's the question of whether the developer will sign it. If you're a licensed architect, you most likely have insurance, so we're talking about non-registrants. The developer is probably hiring a non-registrant to save money (red flag #1). Unless there's a clear discussion about liability and the developer is providing the insurance, I'd walk away. If he's willing to sign that document and doesn't have insurance, he's an idiot (red flags #10-50). If he's not willing to sign it, I'd consider it an amount of risk that simply did not justify the fee.

And, as Lew pointed out, even if your firewall holds, ya still got those (%*(#^# legal fees.

If you've read many of the threads on this topic, you'll know that I myself am still paying tuition to the School of Hard Knocks, in the form of legal fees in a case that started in 2002. Yep - 5 years and still counting.

So, you can discount the advise of those who've already paid for the lesson. I appealed to the gods of economics and the gods of human nature to have those laws repealed just because I didn't think things should be the way they are. They turned me down flat and spanked me on my way out the door.