Felons Affecting Insurance
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  California's Leader in Community Association Law December 18, 2020
INSURANCE IMPACTED BY
BOARD FELON

QUESTION: The board found out recently that the President was convicted of a felony a few years ago. The underwriter for the association’s fidelity insurance advised us that if the felon is not removed from the board, the carrier will cancel the policy. I doubt this director will cooperate and resign. Can the board remove him?

RESPONSE: That's a really good question. The election bill, SB 323, was badly drafted with many internal inconsistencies and some glaring oversights. This is one of them.

Nominees and Insurance. The bill sponsored by Marjorie Murray's organization forced all associations in California to accept felons on their boards unless it impacted their fidelity bond. Due to poor drafting, her bill created a large gap. Here is the language:
(c)...an association may disqualify a person from nomination as a candidate pursuant to any of the following: ...(4) An association may disqualify a nominee if...a past criminal conviction that would, if the person was elected, either prevent the association from purchasing the fidelity bond coverage required by Section 5806 or terminate the association’s existing fidelity bond coverage. (Civ. Code §5105(c)(4).)
You will notice the provision only deals with disqualifying someone from nomination. The statute has no authorizing language for removing a director once the person is elected.

Corporations Code. Normally we would turn to Corporations Code §7221(a), which allows a board to declare vacant the seat of a director convicted of a felony. Unfortunately, Ms. Murray's bill overrides this provision because her bill specifically applies to associations and specifically allows felons to serve on boards. Once a felon is elected to the board, the only entities authorized to remove a director are the courts or the membership.

Insurance Takes Priority. With two statutes completely at odds — one mandating insurance coverage (
Civ. Code §5806) and the other preventing boards from removing felon directors — I believe insurance takes priority. No association should operate without insurance. That means the board should vacate that director's seat and appoint a replacement director.

Possible Litigation. The director so removed from the board might sue to regain his seat. I don't mind defending that lawsuit. I can't imagine a judge ordering an association to operate without insurance.

RECOMMENDATION: I recommend amending bylaws to include a provision allowing boards to remove a director whose past or present criminal activity would cause the association to lose insurance coverage required by Civil Code §5806. At some point, let's hope common sense prevails and the legislature rescinds the dumpster fire known as SB 323.

 
2020 YEAR-END
WRAP!

This is our last newsletter of 2020 — a year of extraordinary challenges for our industry. A pandemic arrived on our shores without warning and overnight everyone had to learn how to quarantine, work from home, social distance, wear masks, and hold meetings via Zoom. The coronavirus decimated California's economy with millions of workers losing their jobs from business closures and mass layoffs. This caused association budgets to suffer shortages from delinquencies.
 
Newsletters. At ADAMS|STIRLING, we are grateful we were able to serve our clients and our readers by answering questions and drafting emergency rules. We normally publish 24 newsletters a year (two per month). However, there was such a demand for information during the pandemic that we published one to two per week, for a total of 81 newsletters.

Website Traffic. We also saw an increase in traffic on our website. In one 30-day period, we had over 10.5 million requests on the Davis-Stirling.com website. A “request” is a message from a browser to our website server. It provides the user with desired webpages which are then displayed on the user's screen. Due to the high traffic, of the 109 million websites in the United States, Davis-Stirling.com ranks in the upper 14%.

New Projects. This year we rolled out an "Election Timeline Calculator" to help board members and managers address the confusing election timeline created by SB 323. We have another project in the works we think will be just as useful. We will provide details in our January 2021 newsletters.


Feedback. We want to thank everyone for all the questions, kudos, and newsletter feedback. We also want to thank you for entrusting us with your legal work. This year we added four new attorneys to the firm to meet the demand.

BEST WISHES. May our readers enjoy the holidays and have a New Year filled with health, peace, and happiness. From all of us at ADAMS|STIRLING, Merry Christmas and Happy New Year. See you in 2021!

 

Balcony Inspectors. Many thanks to all the readers who sent in information about balcony inspectors! Our condo has to have a special assessment to cover the cost. I'm happy to find so many names to pick from! -Christine K.

Millions of Thanks. Millions of thanks for your valuable newsletter. I have read all of them from 2019 to the present. They have shown me how to function effectively and fulfill my fiduciary duties as a board member. Thank you for your consistent efforts to keep us abreast of current laws and trends. –Lilly C.

State Mandates. I bought my condo before the Davis-Stirling Act. Things were simple and I understood what I was getting into. Now I feel like the State has taken over my property with all their mandates; volunteer board members are overwhelmed or clueless; management companies are incompetent or taking advantage of the situation; and the majority of homeowners, who don't even know about the Davis-Stirling Act, are too apathetic to understand the seriousness of the situation. -Lee B.

RESPONSE: The legislature is churning out laws without any thought to their impact. The people of California would be better off if the legislature met once every ten years and then only for an hour.

NEWSLETTERS. Readers can find current year and prior year newsletters posted here. Older newsletters are not posted since the information they contain can change over time with new statutes and case law. The website itself is kept updated with current information which can be found via the "Index" or through our website's internal "Google Search" feature. You can find it in the upper right corner of the website under our ADAMS|STIRLING logo.

 

Federal Update. The Centers for Disease Control (CDC) updated their holiday guidelines regarding small gatherings during winter holidays and coping with holiday stress.

Statewide Update. The State rolled out "CA Notify" on December 10th, which will allow persons to anonymously be told they have been exposed to someone with Covid-19 using Bluetooth technology on smart phones. The application will provide an alert if you have been within 6 feet of someone for more than 15 minutes that has voluntarily provided information to the application that they tested positive for Covid-19. December 7, 2020 Press Release re CA Notify; December 9, 2020 Press Release re CA Notify Launch.

The State released a December 13, 2020 Press Release re Vaccine Safety.

The Southern California and San Joaquin Valley regions are under the Regional Stay at Home Order effective December 6, 2020. The Greater Sacramento Region is under the Regional Stay at Home Order effective December 10, 2020. While some Bay Area counties are voluntarily under the Regional Stay at Home Order, the Bay Area Region is close to the threshold for falling under the Regional Stay at Home Order.

NorCal Counties. Bay Area is now under the Regional Stay at Home Order effective 12/17/20. Health Officials issued a Joint Statement regarding vaccine distribution.

San Mateo County issued a December 16 Press Release regarding the Regional Stay at Home Order.

Butte County is under the Regional Stay at Home Order effective 12/10/20 and issued a December 9, 2020 Press Release regarding the same.

Calaveras County issued a December 5, 2020 Press Release regarding the Regional Stay at Home Order.

Contra Costa County updated its Mass Quarantine Order. The County provided Vaccination Information.

El Dorado is under the Regional Stay at Home Order effective 12/10/20 and issued a December 9, 2020 Press Release regarding the same. The County also issued a December 10, 2020 Press Release regarding clarification of Regional Stay at Home Order. This press release indicates that those under the Regional Stay at Home Order cannot honor out of state reservations for non-essential travel unless the reservation allows enough time to quarantine, further, in state reservations for non essential travel cannot be honored.

Fresno County issued updated Youth & School-Based Sports Guidance. Fresno County issued a December 5, 2020 Press Release regarding the Regional Stay at Home Order.

Lake County issued a December 11, 2020 Press Release regarding rising cases and vaccine progress.

Madera County issued CDPH December 7, 2020 Updated Quarantine Guidance.

Marin County issued revised Appendix C-1 (Revised 12/4/20) to comply with the Regional Stay at Home Order.

Mendocino County issued a December 7, 2020 Press Release indicating that eight new cases were traced to Building Bridges Homeless Resource Center and Day Center.

Monterey County issued a December 9, 2020 Press Release indicating that Monterey is choosing to follow the Regional Stay at Home Order and the County issued a December 9, 2020 Stay at Home Order.

Nevada County is under the Regional Stay at Home Order effective 12/10/20 and issued a December 9, 2020 Press Release regarding the Regional Stay at Home Order.

Placer County is under the Regional Stay at Home Order effective 12/10/20.

Sacramento is under the Regional Stay at Home Order effective 12/10/20. The County issued a revised Health Order to comply with these requirements.

San Francisco issued an updated Health Order dated 12/9/20. The County allows meeting one person outside your household to take a walk, hang out at the park or play low contact sports like golf, tennis, pickleball, and bocce ball.

San Joaquin County issued a December 8, 2020 Press Release regarding next steps in the County.

San Mateo County issued a December 10, 2020 Press Release regarding the current state of affairs in the County.

Santa Clara County issued a mandatory directive to follow the State’s Regional Stay at Home Order. The County issued a December 9, 2020 Press Release regarding vaccinations.

Santa Cruz County issued a December 10, 2020 Press Release regarding submission of a vaccine plan.

Sonoma County issued a December 10, 2020 Press Release regarding the County’s adoption of the Regional Stay at Home Order and issued a new Health Order related to the same.

Sutter County is under the Regional Stay at Home Order effective 12/10/20.

Tuolumne County issued a revised Short Term Lodging Order.

Yolo County is under the Regional Stay at Home Order effective 12/10/20. The County issued a revised Health Order.

Yuba County is under the Regional Stay at Home Order effective 12/10/20.

SoCal Counties. Imperial County issued a health order to align with the Regional Stay Home Order and supersedes all local orders in effect while Regional Stay Home Order is in place.

Los Angeles County revised its safer at home health order to align with Regional Stay Home Order. Outdoor pools are allowed to be open for regulated lane swimming, indoor and outdoor pools are permitted to allow drowning prevention classes. Tennis and Pickleball guidelines were updated further, adding that restrooms and frequently used items should be sanitized hourly. Campgrounds and RV parks protocols were updated to comply with Regional Stay Home Order that prohibits overnight stays until further notice.

The City of Los Angeles issued a targeted stay at home order to align with regional stay at home order.

Orange County issued a health order regarding senior residential care facilities with restriction on communal dining if employee or resident tests positive.

San Bernardino County petitioned the California Supreme Court to seek local control of Covid measures rather than be restrained by the state’s regional approach.

San Diego County – New health order to align with Regional Stay Home Order including prohibition of sales of food and drink at outdoor recreation facilities and prohibition of overnight stays at outdoor recreation facilities.

San Luis Obispo County decreased quarantine period from 14 days to 10 days from exposure for those who are asymptomatic and do not work in a high-risk setting. The County published a press release on how Covid-19 vaccinations will be distributed in SLO.

Santa Barbara changed its health order to align with Regional Stay Home Order.

READING THE CHART. Because the chart is large and the text small, you can easily make it larger for viewing by holding down the "Ctrl" key on the left side of your keyboard and then using your finger to scroll forward or backwards with the wheel on your mouse. You will see the text grow larger or smaller as you move the wheel. For a list of county restrictions and links to health department orders, see County Chart 12-14-20. The chart is also posted on our website.


 
Boards can contact us for friendly,
professional advice.


Adrian J. Adams, Esq.
Founder & Managing Partner
ADAMS|STIRLING PLC
DISCLAIMER. Our newsletter provides commentary based on sketchy information we receive from readers. From time to time, we add a little humor. Some find it amusing. Others are appalled. Some readers are excited when they score free legal advice. Not so. Our newsletter provides commentary only, not legal advice. You need to pay real money for an attorney to review all the facts and give you a legal opinion. We do that too, but you have to hire us. It's okay, we're friendly. Keep in mind we are corporate counsel to California associations only. Ask us for a proposal to represent your association.

I join Adrian in inviting you to contact us for your association's legal needs.

Hon. Lawrence W. Stirling, Senior Partner ADAMS|STIRLING
Author of the Davis-Stirling Act

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