It may be the economy or it may be something in the air—whatever the reason, we have noticed a significant increase in small claims lawsuits initiated against associations. Owners and residents traditionally bring small claims actions against associations because they can do so without the assistance of an attorney. Despite the frequency with which small claims lawsuits are initiated against associations, many directors and managers remain confused about the small claims process. This article addresses the basic, and most often inquired-about, concepts pertaining to small claims lawsuits.
Requirements
Although small claims actions are not subject to all the procedural requirements that county and district court cases are subject to, there are nevertheless certain requirements that must be met when a small claims action is initiated. These requirements include the following:
* The amount in dispute must not be over $7,500
* A written summons and complaint must be filed by the plaintiff with the small claims court clerk that sets forth the facts giving rise to the action
* The summons and complaint must be served upon the defendant at least 10 days before the trial date
* The county in which the action is filed must be the county in which the association is located
Failure to comply with any one of the above requirements may result in the dismissal of the lawsuit, or an order from the court to refile the complaint.
Representation by Attorney
Many directors and managers believe an association cannot be represented by legal counsel in small claims court. Due to a recent change in the court rules, this is no longer true. In the past, if an association wanted legal representation, its attorney was required to file a motion with the court moving the case to either county or district court. Currently, attorneys need only file a “notice of representation” with the small claims court no later than seven days before the trial date. Once this is done, the attorney is free to represent the association in the small claims court.
Insurance Coverage
In many instances, the damages claimed by a small claims plaintiff are less than the association’s deductible. For this reason, many associations do not submit these claims to their insurance carrier. However, prior to making this decision, boards should be aware of and consider the following:
· There is always a possibility that a small claims lawsuit may “blow up” into something much more serious. Because insurance carriers generally require they be notified of claims as soon as possible, failure to immediately put the insurance carrier on notice of a small claims lawsuit (after the association is served) may result in the denial of coverage at a later date.
· Just because the amount sought by the plaintiff may be relatively small, even less then the association’s deductible the cost to defend the case will likely exceed several thousand dollars. Both figures should be considered before the association determines whether to submit the claim to its carrier.
Therefore, before making a decision about submission of an insurance claim, consult with your legal counsel concerning these issues.
Additional Advice
· Because small claims actions have a tendency to become more involved throughout the process, it is generally recommended that the association be represented by legal counsel. Even if the association determines to “go it alone” the association should seek and obtain advice from counsel on how to present its defense and whether any case law or statutes exist that will bolster the association’s position.
· Remember, if the association prevails at trial it will likely be entitled to recover its attorney fees from the losing party.
· A trial in small claims court is very informal. The magistrate does not follow formal legal or evidentiary procedures. Just because the plaintiff’s complaint alleges one thing doesn’t mean the magistrate won’t let the plaintiff add additional allegations of association wrong doing. So come prepared to respond to not only what is in the complaint but also other issues as well.
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