A federal appellate court ruled Monday in favor of an insurer seeking to cancel its homeowners' association insurance, arguing that the association had not disclosed a situation that would likely give rise to a claim in its coverage application.
Farmington. Hills Michigan had filed a lawsuit against Agoura Hills, California-based Lake Lindero Homeowners Association in the U.S. District Court in Los Angeles, claiming the association had concealed facts in response to questions about applying for its insurance, according to the 9th U.S. Court of Appeals. Circuit Court of Appeals in San Francisco and Atain Specialty Insurance Co. v. Lake Lindero HOA, Lordon Enterprises, Inc. d / b / a / Lordon Management. brought by its former property management company, which had been terminated, the ruling said.
By affirming the lower court and ruling in favor of the insurer, the three-judge appellate court said that the association had not disclosed anything in response to a question about the insurer's application as to whether it knew of any situation that could give rise to a claim.  "But there is no genuine dispute" that the chairman of the newly elected association board had run on a platform to terminate the association's contract with its existing management company, and that before the application was submitted, it had sent at least eight messages to the management company claiming intrusion and threat of dismissal, the verdict said.
"These circumstances clearly posed a risk that claims would be made against (the association) or its directors," it said in the judgment. . "It is irrelevant that these risks had not yet been realized; The purpose of the question was to enable Atain to assess the risks it took out, ' stated in the decision, in the decision that the insurer had the right to terminate its insurance and has no further obligation to defend or replace the association in the underlying state court dispute.
Lawyers in the case did not respond to a request for comment or could not be reached.