RELEASING
CONFIDENTIAL MATERIAL

QUESTION:  What is the amount of time for executive sessions to remain confidential?

ANSWER: For most executive session matters, confidentiality should extend indefinitely. This includes personnel matters, an owner's delinquency payment plan, the identity of rules violators, and most legal matters. Releasing confidential information could result in claims of defamation, invasion of privacy, violations of statute, etc. The Legislature made such matters confidential for a reason, so boards should be cautious about releasing executive session information.

Who Can Waive Confidentiality? The authority to release information is held by the board as a whole, not by individual directors. Once the information is released, it cannot be taken back. Accordingly, directors who release information without board approval may be in violation of  their fiduciary duties and may be personally liable for any damage that results.

FANNIE MAE REQUIREMENTS
Reader Feedback

#1. Your comment about [insurance] pooling is off the mark. If that were the case every carrier that is set up as an interinsurance exchange would no longer be an acceptable policy for Fannie Mae. That would include Farmers, and Auto Club to just name two. I think you have some bad information there. If that were the case it would have been on the front pages of every major newspaper in the country. Not to mention that it would shut the real estate industry down completely. CIBA is a risk purchasing group not a risk retention group. The property portion has an automatic reinstatement after every loss. They don’t share anything, that would impinge upon their ability to be acceptable to a financial institution, including Freddie an Fannie. -Elliot Katzovitz, Elliot Katzovitz Insurance Agency, 8503 Washington Blvd. Culver City, CA 90232

#2.  Your comments about pooling are correct. What Fannie Mae considers unacceptable is "a blanket policy that covers multiple unaffiliated condominium associations or projects." In my opinion, CIBA is both. It is a "blanket policy" and it "covers multiple unaffiliated condominium associations or projects." While there is a large shared limit ($500,000,000 for All Risk, $150,000,000 for Earthquake), there is nothing in Fannie Mae's guidelines currently that would suggest an exception for CIBA, regardless of whether or not the limits are automatically reinstated after each loss or not. -Timothy Cline, Timothy Cline Insurance Agency, 725 Arizona Avenue, Suite 200 Santa Monica, CA. 90401

#3.  As to Fannie Mae andAnnouncement 8-34, your initial comments in "HOA Master Policy" are correct with respect to "multiple unaffiliated condominium associations"--Fannie Mae does not approve of them. The word "pooling" as you use it is also correct in that Fannie Mae does not like pools. Their position on multiple unaffiliated condominium associations and pools arose in part out of the Florida situation where the Florida Condominium Act was allowing associations to form self-insurance pools with high attachment points as long as the "pool" met certain stringent criteria. Fannie Mae simply decided the risk was too great. These types of arrangements also meant that any given association would not be the First Named Insured in the policy--whomever put the group or pool together would be the First Named Insured (i.e. CIBA, to use your example). Some misunderstand the use of the word "pool" with respect to Farmers--Farmers is areciprocal insurance exchange (a pool of sorts), but all of its policies are issued with the entity being insured as the First Named Insured. This is not the type of "pool" that Fannie Mae is referencing. -Clifford J. Treese Association Information Services, 7724 Creekside Drive Pleasanton, CA 94588

#4. I agree with the response from Mr. Treese. And truly, it isn’t in the best interest of any association to be part of an insurance pool unless it is absolutely necessary (i.e., loss issues carry the risk toward un-insurability). Michael Berg, Berg Insurance Agency, 23651 Birtcher Drive, Lake Forest, CA 92630

COMMENTS: Michael Marino, President/CEO of CIBA Insurance Services, contacted me about the CIBA program. He believes his program complies with the new Fannie Mae guidelines. He reported that the Program is not a shared aggregate or pool as previously reported and that CIBA is currently under review by Fannie Mae. I've asked Mr. Marino to let me know the outcome of the review so I can pass on the information to everyone. -Adrian Adams

RESIGNING DIRECTOR
CONTINUES TO VOTE

Dear Adrian, While it may seem best to avoid the confrontation with the former director, and simple to just overlook or ignore the fact that the director resigned, doing so can create other serious problems for the board and the corporate association.

If the association’s attorney attends a board meeting with the former director in attendance, the attorney client privilege may be lost. This can have serious repercussions when board members have spoken freely believing their remarks cannot be compelled to be disclosed to others since the lawyer is present and the attorney client privilege (“ACP”) is operative. However when there are present during the conversation with the lawyer other persons (like the former director) who are not part of the client control group (the board) or those necessary to carry out the board directives and decisions (the manager and staff) then the ACP does not attach to the communication.

Furthermore, if before the board replaces the resigned director, the board allows the former director to vote on issues of great import and the result is a 3 to 2 vote to approve, with the former director voting to approve, the result if challenged in court will not stand. The real vote in this simple example is 2 to 2, and it does not pass since it didn’t get the affirmative assent of a majority of the board members in attendance. Remember there are only 4 directors present as the 5th person is no longer a director.

There may be other issues as well but these are both significant and make the point that the directors should not simply ignore the former director’s presence, attempting to act as if no resignation took place.
-Richard P. Neuland Attorney at Law Neuland, Nordberg, Andrews & Whitney LLP

RESPONSE. I agree. A director who resigns cannot continue to participate in board meetings and vote on issues (unless the resignation was made effective at a future date). Doing so seriously compromises the association as Mr. Neuland described. -Adrian Adams

RAISING DUES

#1.  Didn't you mean assessments?? -Harry I.

#2.  I do not mean to be picky but one of my pet peeves is when people use the term dues instead of assessments. I have learned the difference: dues are voluntary (just like when you pay your membership dues to a health club) and assessments are mandatory. The term “assessments” is the right term. And that’s what we use in the CC&Rs. -Lorna L.

Response:  Owners often use the term "dues" when referring to regular assessments and "assessments" when referring to special assessments. The person who sent the question used the term "dues." It may not be correct technically but it is widely used and understood, and I’m okay with it. -Adrian Adams