Trial Ready Defense
                Recognizing the trigger of claims and how to handle
                  same to prepare ...
I.      What is a claim?

Merriam-Webster on line dictionary defines a claim as
follows:

Main Entry: 2claim
Function: nou...
3) a criminal proceeding commenced by a return of an
     indictment; or

  4) a formal administrative or regulatory proce...
4. Alleged violation of constitutional rights: i.e. right
     to free speech, for instance, prohibition on the
     place...
The Board has to date approved all ten submitted.
Application number eleven comes in and the Board
denies it without infor...
III. How can you attempt to prevent a
       claim?

The best you can do is “attempt” to prevent a claim. You
cannot stop ...
hypermnesia
         hye-perm-NEE-zhee-uh noun
         : abnormally vivid or complete memory or
         recall of the pa...
packet, executive or workshop session minutes, may
contain confidential or privileged information.

The first challenge ma...
Often times when a claim is presented, you will be
contacted by an insurance adjuster for the insurance
carrier and/or an ...
relationship on bad terms. In situations like these, the
agent and the insurance carrier should be alerted that
there is a...
claims, they must alert general counsel to determine if
claims will be prosecuted in the same action. A failure to
file an...
historical data and without the ability to comprehend the
potential defense arguments which can be used on behalf
of the A...
examples of the types of subject matter
   documents/files necessary, are as follows:

i. work logs:
   work logs show wha...
iii. telephone logs:
     Why? Because if you do not track or record
     telephone messages, returned calls,
     voicema...
“contracts”. Why? A proposal is written
     by the contractor and will not necessarily
     reflect the Association’s nee...
that if a Plaintiff challenges the action of the
      Board, the Board has the opportunity in
      most circumstances fo...
Simply put: correspondence is proof of
    communication.

xii. e-mail:
     “Warning, warning”.
     If any of you have e...
mails are not privileged Association
communication, absent some exceptional

circumstances. Just as the mere presence
of c...
It’s easy to type an e-mail as you deal with
     a stressful issue on the phone, as co-workers
     are clamoring for you...
No, that is not a series of typos above, it is a
             silly reminder that the Association must be
             lis...
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Karyn Branco CAU Article Trial Ready Defense

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Transcript of "Karyn Branco CAU Article Trial Ready Defense"

  1. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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.

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