1. Trial Ready Defense
Recognizing the trigger of claims and how to handle
same to prepare the early stages of the defense
May 8, 2009
Karyn Kennedy Branco, Esq.
Kennedy, Wronko, Kennedy
Suie 104
1330 Laurel Avenue
Sea Girt, New Jersey 08750
732.282.9100 | office
732.612.1314 | eFax
KKennedyBranco@optonline.net
Karyn Kennedy Branco, Esq. May 8, 2009 1

2. I. What is a claim?
Merriam-Webster on line dictionary defines a claim as
follows:
Main Entry: 2claim
Function: noun
1 : a demand for something due or believed to be due
<insurance claim>
2 a : a right to something; specifically : a title to a debt,
privilege, or other thing in the possession of another b : an
assertion open to challenge <a claim of authenticity>
3 : something that is claimed; especially : a tract of land staked
out
Basically, the first part of the definition is what we need
to remember, a claim is a “demand”.
Insurance policies on the other hand, may define “claim”
as follows:
“Claim” means:
1) a written demand for monetary damages;
2) a civil proceeding commenced by the service of a
complaint or similar pleading;

3. 3) a criminal proceeding commenced by a return of an
indictment; or
4) a formal administrative or regulatory proceeding
commenced by the filing of a notice of charges,
formal investigative order or similar document,
against an Insured for a Wrongful Act, including an
appeal therefrom.”
See: www.kdisonline.com/products-directors.htm
The types of claims normally triggering directors and
officers claims fall under the term: “breach of fiduciary
duty”. Breach of fiduciary duty takes on many forms.
The following is illustrative of the types of complaints
which can be seen as breach of fiduciary duty claims:
1. Mismanagement: i.e. failure to properly budget,
improper expenditure of Association monies
2. Violation of Open Meetings Act: i.e. failure to
approve contracts in open session; failure to take
other forms of votes in open session
3. Failure to provide Alternative Dispute Forum

4. 4. Alleged violation of constitutional rights: i.e. right
to free speech, for instance, prohibition on the
placement of signs
5. Failure to make repairs
6. Failure to procure appropriate insurance coverage
7. Discrimination claims
The list could become exhaustive, but the main theme
is allegations of “wrongful acts”. Wrongful acts
surround decision-making or the failure to make
decisions.
II. How does a claim start?
A claim normally starts with a “problem”, an “issue”, a
“disagreement”. Unfortunately claims arise where there
is a failure to communicate. A failure to communicate
does not necessarily mean management and the Board
has not responded, it could in fact mean that the owner
simply cannot hear or understand what is being said.
When responding to issues of owners, it is helpful to
provide as much information supporting a decision being
made as possible. For instance, pretend the Board has the
authority to grant or deny applications to install patios.

5. The Board has to date approved all ten submitted.
Application number eleven comes in and the Board
denies it without informing the owner why. This is the
beginning of a lack of communication and a potential
claim. The Board, as well as management, must be able
to articulate why it is making certain decisions. The
example above, denial of the patio application, should be
able to be easily supported, i.e. too large, regulations call
for 12’ by 10’; pink flamingo concrete prohibited, etc.
It appears simple to remember that reasons must be
articulated, many of you are most likely saying, “of
course,” as you read this, but because of the demands
placed on managers and volunteer board members in this
industry, it is often easy to make a decision and forget to
fully inform the person as to why it is made.
When the Board is making a decision, it is important that
they can articulate and itemize why a decision is being
made. This information should then be reduced to
writing in the form of minutes if within a meeting or
other confirming written memoranda. Months or years
later, a judge will sit and ask, “what was the basis of the
board’s decision?” That will be the most repeated
question throughout the course of the litigation.

6. III. How can you attempt to prevent a
claim?
The best you can do is “attempt” to prevent a claim. You
cannot stop a disgruntled owner from filing a claim, from
commencing litigation, from yelling at board meetings or
any other such activity. Rather, you can implement
policies, practices and procedures in an effort to prevent
claims.
1. Communication with owners, board members,
general counsel, contractors, etc.
a. Verbal
b. Written
2. Organization: identifying tracking databases:
cover your bases
Written records evidencing what has been
requested by an owner and how management
and the Board has responded are extremely
valuable tools. Why? Because most of us do
not have hypermnesia.

7. hypermnesia
hye-perm-NEE-zhee-uh noun
: abnormally vivid or complete memory or
recall of the past
Example sentence:
Julie's hypermnesia enabled her to
perfectly recall any page in her textbook
for the test.
Merrian-Webster Online Dictionary, 2004.
Written records may have the ability to stop a claim in its
tracks. For example, unit owner writes to management
stating that the Board has breached its fiduciary duty for
the failure to solicit bids and vote on contracts at an open
meeting. If such actions, the solicitation of bids and
recordation of the vote(s), are reduced to writing, the
owner can then be presented with this information in an
attempt to stop the issue, which could ripen into a claim.
What kind of documents would these be? Solicitation
letters to contractors, responses, recordation of lack of
responses to solicitation, manager report with information
attached, board packet with information attached, board
minutes and/or agendas for meetings. Granted, all of this
information will not always be given over to the owner.
Some of the documents, i.e. manager report, board

8. packet, executive or workshop session minutes, may
contain confidential or privileged information.
The first challenge may be compiling the information
needed. How documents are kept is within the control of
the manager.
IV. What do you do with a claim?
Once you have identified what appears to be a claim,
contact your insurance agent and general counsel to the
Association.
Individual policies will require that notice of claims be
submitted within a particular time frame and failure to
timely give notice will prejudice the insured’s rights
under the policy to defense and/or indemnification.
It is very important to know where the insurance policy is
at all times. Maintain a file for the Association which
contains the insurance policies. Spend the time to speak
with the agent and find out what is covered under the
policy and how claims can be identified and how and
when notice should be given.

9. Often times when a claim is presented, you will be
contacted by an insurance adjuster for the insurance
carrier and/or an investigation firm on behalf of the
carrier. You will be asked for information and
documents. Timing is everything. The quicker you can
provide the information and respond, the sooner the
insurance carrier can advise you as to how the claim will
proceed and why. (See discussion below on “extra
work”).
V. What is a conflict?
A management company is the additional insured on the
Association’s policy. Litigation may be filed by a
Plaintiff wherein the Plaintiff names the Association,
management company and employees of the Association.
Ordinarily, the insurance carrier will assign one law firm
to defend the defendants interests. The reason for this is
that all parties normally worked together regarding the
subject matter of the complaint and are on the “same
team”. Sometimes though the team has been disbanded.
Employees may have been fired. The management
company and the Association have terminated their

10. relationship on bad terms. In situations like these, the
agent and the insurance carrier should be alerted that
there is a potential that some of the defendants may have
claims against one another, what we call in the legal
field, “potential conflicts”.
VI. When a “Complaint” is received:
When the Complaint is received, the manager must alert
the Board, general counsel and the insurance agent. The
Complaint must be answered by an attorney within a
specific period of time. If the claims within the
Complaint are covered by the insurance policy, the
carrier must be notified right away so it can preserve its
rights, assign counsel and begin to defend the litigation.
VII. What are affirmative claims?
Affirmative claims are claims that the Association may
have against the Plaintiff, i.e. a counterclaim for
damages, or claims against a third party. The Association
policy is a policy to defend and sometimes indemnify,
not to prosecute affirmative claims. Consequently, if
management or the board is aware of these types of

11. claims, they must alert general counsel to determine if
claims will be prosecuted in the same action. A failure to
file and litigate these claims during the course of defense
often means you will lose the opportunity to litigate down
the road.
VIII. How do you interact with defense
counsel assigned by the insurance
carrier? Friend or foe?
Defense counsel is your friend. I know, you are saying,
“of course you would say that!”
Defense counsel is assigned by the insurance carrier to
defend the Association and management. The counsel’s
goal is to obtain all documentation and information
which could be used to evaluate the defense. Evaluation
of the defense means the attorney will be attempting to
plan whether motions to dismiss claims can be filed,
whether the Plaintiff has sued the right parties, whether
the Plaintiff has any basis for the claims presented,
whether the case should be mediated, settled or proceed
to trial.
Without your assistance, and the assistance of the board,
defense counsel works in a vacuum without recourse to

12. historical data and without the ability to comprehend the
potential defense arguments which can be used on behalf
of the Association and management.
VIIII. Dealing with “extra” work, the
“discovery” and “defense
evaluation” process:
A. Homeowner file:
1. Some but not all documents that will be
necessary to evaluate the claim or defense
of the litigation will be within the
homeowner file. These documents
obviously will tend to be copies of direct
correspondence from the owner to
management or the Board. Perhaps the
physical folder may also contain
handwritten notes.
B. Subject matter:
1. file tracking: retrieval of physical
documents within files
2. computer databases: accessing
information contained within computer
files, inclusive of e-mail communication,

13. examples of the types of subject matter
documents/files necessary, are as follows:
i. work logs:
work logs show what was requested to be
done; when it was requested to be done; if
work was completed; if corrective work or
follow up work was deemed necessary and
should detail persons involved with
requests, the work performed and approval
of work
ii. complaint logs:
Plaintiffs tend to allege that “others” have
made similar complaints. If a complaint log
is in place, it is easy for management to
track complaints and to refute general
allegations by Plaintiffs that others have
complained of the same type of incident or
conduct or lack of action. Further, if the
complaint log is kept in regular business
order, Plaintiffs will have difficulty
establishing that management somehow
failed to make note of a complaint.

14. iii. telephone logs:
Why? Because if you do not track or record
telephone messages, returned calls,
voicemail messages and conversations,
Plaintiffs will say they have called when
they have not. What proof does a manager
have against a person claiming to have
called? Telephone logs kept in good order.
iv. invoices:
Easy. This is proof that work is claimed to
be performed. Payment is proof that work
was accepted and deemed satisfactorily
performed. If there are objections to the
work performed, same should be noted on
the invoice and/or on corresponding letters
sent to the contractor disputing the amount
invoiced or the work claimed to be
completed.
v. proposals:
Proposals are just that, proposals for work
to be performed, an invitation to do
business, not the agreement itself.
Proposals should never be used as

15. “contracts”. Why? A proposal is written
by the contractor and will not necessarily
reflect the Association’s needs or protect
the Association in the event the work is not
performed, a dispute ensues, litigation is
filed, etc.
vi. check register/cancelled checks:
proof of payment.
vii. budget:
A budget can demonstrate how much
money the Association has allocated for
services. While this may seem like a “no-
brainer” it is again a concrete demonstration
of acts taken by management and the board
in furtherance of the fiduciary duty to
administer and govern the association.
viii. minutes:
Need I explain this? It tells the story of
what the Board decided and why. A
particularly troublesome aspect of directors
and officers’ claims is that the Plaintiff is
entitled to obtain proof of the “thinking” of
the Board. What does this mean? It means

16. that if a Plaintiff challenges the action of the
Board, the Board has the opportunity in
most circumstances for two types of
defenses: 1. Reasonableness; and 2. the
Business Judgment Rule. Both defenses
require proof that the Board has taken
action in its fiduciary capacity and has
evaluated the reasons for the decisions
made. The minutes demonstrate the reasons
that Boards take certain actions and not
others, again, the minutes “tell the story”.
ix. board packets:
Board packets demonstrate what issues are
presented to the Board, when they are
presented, action requested or needed to be
taken, etc. Board packets fill in the history.
manager reports:
x.
manager reports detail the issues presented
to managers, the information conveyed to
Board members, the action requested to be
taken, etc.
xi. correspondence

17. Simply put: correspondence is proof of
communication.
xii. e-mail:
“Warning, warning”.
If any of you have ever watched the
television program, “Lost in Space”, you
can hear the robot’s voice saying, “Danger,
danger, Will Robinson.” And then you may
recall the boy’s face, caught in the
headlights. Imagine this scene and imagine
that the boy was innocently exploring space
when the robot appeared out of nowhere to
warn of an impending danger. Imagine you
are that boy sending e-mails and defense
counsel is that robot. At that point, it may
be too late. Actions may have been taken or
unnecessary communications written in e-
mail which will add fuel to the fire when
handling a claim and eventually defending
that claim in court.
E-mails are discoverable documents. If the
e-mail does not include direct
communication with counsel, or at a
minimum, include counsel as a “cc”, the e-

18. mails are not privileged Association
communication, absent some exceptional
circumstances. Just as the mere presence
of counsel at an executive session will not
automatically render all communications or
minutes of that executive session privileged,
a “cc” to counsel on e-mails will not
automatically render such communications
privileged.
What does this mean? The other side is
entitled to read your e-mails, even if they
have been deleted. A subpoena can be
issued or an order of the Court to retrieve
deleted e-mails and produce such e-mails to
your adversary.
When counsel asks you to provide all
discoverable and/or relevant documents,
counsel is asking you for e-mail
communication, the good, the bad and the
ugly.

19. It’s easy to type an e-mail as you deal with
a stressful issue on the phone, as co-workers
are clamoring for your attention or as board
members are demanding an immediate
response, but just because the means of
conveyance are practically instantaneous, it
does not mean your thought process and
evaluation of the issues are. Problem
solving and conducting business takes time,
regardless of the advent of e-mail.
Managers, boards and attorneys must stop
and think before they type an e-mail. Ask
yourself a simple question before you type:
If this e-mail were to be printed in the New
York Times with my photograph, name,
home address and telephone number
identified, would I still type the same
words?
xiii. insurance certificates:
“Additional Insured”
“Additional Insured”
“Additional Insured”

20. No, that is not a series of typos above, it is a
silly reminder that the Association must be
listed as an additional insured on
Contractor’s certificates of insurance.
X. Conclusion:
Once litigation has ensued and you have provided
documents and information to defense counsel, you may
feel that you have done enough and that you will allow
defense counsel to now chart his or her own course.
Defense of litigation requires ongoing participation.
Counsel will send you notices to appear for depositions,
arbitration, and possibly trial. Correspondence received
must be distributed to the Board and general counsel.
Discovery documents and deposition transcripts produced
by the Plaintiff must be reviewed so counsel can be
alerted as to rebuttle information in the form of
documents or potential witness testimony. Since the
Board and manager are most familiar with the
community, their review of what is produced during
litigation, either in documents or testimony, is invaluable
to shaping the defense of the claim.