Rapkin Gitlin & Beaumont

Homeowners Association Legal Blog

The Virginia Graeme Baker Pool and Spa Safety Act: What Now?

December 20, 2008 at 1:17 am | Condominium Law
- Posted by Jeffrey A. Beaumont, Esq. | 1 Comment, Add Yours

 

The Virginia Graeme Baker Pool and Spa Safety Act: What Now?

By Jeffrey A. Beaumont, Esq. and Jasmine M. Termain, Esq. 

There continues to be much discussion, and confusion, regarding the Virginia Graeme Baker Pool and Spa Safety Act (AAct@), which took effect on December 19, 2008.  Unfortunately, some of the confusion has come from local governmental agencies.  As a quick recap, the Act covers Association common area pools and spas that have certain types of fully submerged suction drains.  The purpose of this article is to address the legal obligations of associations and their boards of directors, irrespective of what action local governmental agencies are taking, and provide a structured game plan for reducing liability. 

The Act, a federal law, is overseen by the Consumer Produce Safety Commission (ACPSC@), a federal regulatory body.  In actuality, however, the oversight and enforcement of the Act will come from the local and state levels.  This is where the confusion lies.  For example, Los Angeles and Ventura County Health Departments, which oversee local pool safety enforcement and permitting issues, have both issued press releases indicating they will only enforce the Act against new construction and permits pulled for existing pools.  Understandably, County=s with thin budgets and few personnel will have difficulties in enforcing the Act. 

Unfortunately, the County=s enforcement positions has led many community association industry professionals to interpret the County=s positions to mean that existing pools are not subject to enforcement.  This is a categorically incorrect assumption.  Neither the Act, nor potential penalties for violations under the Act, are hinged on whether it can be enforced at a local level.  The CPSC, as the official oversight body for the Act, has its own ability to investigate and enforce.  An association with a pool or spa is strongly encouraged to have its pool vendor investigate and outline whether its pools and spas are compliant with the Act, and, if not, they are strongly encouraged to promptly fix their pools to be in compliance or take steps to minimize the exposure to liability created by their non-compliance. 

In addition to enforcement issues, there are implementation issues with the Act.  Specifically, many pool vendors do not have the parts necessary to properly retrofit applicable drains, there are too few pool vendors for the number of pools requiring fixing, and in a troubled economy, too many associations will not have the funds necessary to pay for the potentially costly repairs. 

Boards are advised that the Act does not consider whether an association has funds to pay for repairs, whether its pool vendor can make the repairs, or any other circumstance.  Rather the Act simply applies, and any pool or spa drain in violation is subject to stiff penalties (up to a $1.8 million fine and potential jail time).  Thus, Boards should take steps to try and mitigate their potential liability while they investigate and decide how to resolve their association=s situation.  

Any association with a pool or spa that has not already investigated whether its pools and spas are compliant with the Act should sent its members a letter advising of the new law, indicating the Board is investigating the matter, include a disclaimer that the pools and spas many not be compliant and use of same is at the member=s own risk, and finally outline the Board will take appropriate steps once it knows where it stands.  Such association=s should also post notices around the pool areas to further enforce the Association=s message and disclaimer of liability.  Once it is established if an association has a pool or spa drain that requires retrofitting, the association should state the process to make the repairs necessary. 

Prior to taking any such action, Boards are strongly advised to seek legal counsel to help evaluate the association=s exposure to liability and decide on the best course of action for its members. 

 

Know Your Rights: The Ability to Retain Cumis Counsel

December 19, 2008 at 6:23 pm | Condominium Law
- Posted by Jeffrey A. Beaumont, Esq. | Add Your Comments

Know Your Rights: The Ability to Retain Cumis Counsel 

       Did you know that in certain situations, a conflict of interest between the insurance company and the homeowners’ association (HOA) may require the insurance company to provide independent counsel to the HOA? 

An HOA has a right to independent Cumis counsel where a conflict of interest exists with its insurance company. 

Cal. Civ. Code section 2860(a) states that if an insurance policy imposes a duty to defend upon a liability insurer and a conflict of interest arises, that insurer must provide independent counsel to represent the insured at the insurer’s expense, unless the insured signs a written waiver. This independent counsel is known as Cumis counsel based on the 1984 case codifying the requirement. (San Diego Fed. Credit Union v. Cumis Ins. Soc, 162 Cal. App. 3d 358 (Ct. App. 1984)). According to James 3 Corp. v. Truck Ins. Exchange, 91 Cal. App. 4th 1093 (Ct. App. 2001), Cumis counsel is required only if the conflict of interest is significant and actual, not merely theoretical or potential.

        In the usual situation, the insurance company and insured share a single, common interest of minimizing or avoiding liability, and dual representation by counsel is beneficial to both. However, various circumstances may create a conflict of interest requiring a liability insurer to provide independent Cumis counsel to the insured, including: 

1)         The insurer reserves its rights on a given issue and the outcome of that coverage issue can be controlled by counsel first retained by the insurer for the defense of the claim. (Civ. Code section 2860(b));

2)         The insurer insures several insureds who have conflicting claims against each other;

3)         The insurer has filed suit against the insured, whether or not the suit is related to the lawsuit the insurer is obligated to defend;

4)         The insurer pursues settlement in excess of policy limits without the insured’s consent and leaving the insured exposed to claims by third parties;

5)         Any other situation where an attorney representing the interests of both the insurer and insured finds that his/her representation of the one is rendered less effective by reason of his/her representation of the other. 

The liability insurer’s duty to defend by appointing independent counsel for the insured arises where the insured shows that the underlying claim may fall within the policy’s coverage provisions. However, where the coverage dispute has nothing to do with the issues being litigated in the underlying action or if the damages are only partially covered by the policy, then there is no conflict of interest requiring the insurer to provide independent counsel for the insured. (Civ. Code section 2860(b))).

The insurance company may limit selection of independent counsel by setting forth minimum qualifications. 

While the insured has a right to select the independent counsel to represent him or her, the insurance contract may contain a provision which sets forth the method of selecting that counsel, including certain minimum qualifications. Civ. Code section 2860(a), (c). The California Practice Guide on Insurance Litigation Chapter 7B-K notes:

The insurer may supply the insured with a list of “independent” counsel experienced in defense work. Unless the policy provides otherwise, the insured is not obligated to accept anyone on that list. But before looking elsewhere, the insured should carefully screen the names on the list. The “plus” is that the insurer is likely to include names of truly experienced defense counsel and there will be no dispute about fair rates. The “minus” is that some defense counsel are so closely aligned with that insurer that it may be difficult for them to give their primary loyalties to the insured and ignore the insurer’s interests if a conflict should arise. 

The insurance company has a duty to pay independent counsel. 

       The insurance company is obligated to pay fees and costs incurred by independent counsel selected by the insured, limited by the usual fees the insurance company pays attorneys retained in the defense of similar actions in the community. Civ. Code section 2860(c).

The insured may waive his right to select independent counsel. 

       The insured has the option, but is not required to select independent counsel. Rather, the insured may elect to waive his right to select independent counsel, and instead authorize his insurer to select a defense attorney to represent him in the lawsuit. Civ. Code section 2860(e).