When an insurance company hires a law firm to defend a lawsuit filed against an HOA, that law firm sees the litigation as an opportunity to make money. When an HOA is not covered by insurance and must hire a law firm directly to provide a defense, the law firm sees the litigation as an opportunity to make money. This should be no surprise to anyone.

Unfortunately, a conflict of interest will exist because the longer the litigation continues, the more money the law firm makes. The longer the litigation continues, the longer the association has to deal with its consequences.

More than 90% of the time, associations are the defendant in a case. See: Reasons HOAs Get Sued.

When a homeowner association is a defendant in litigation, it along with the homeowners, often must deal with the following:

• Litigation makes it more difficult or more expensive for all owners to sell their homes;
• Litigation makes it more difficult or more expensive for all owners to refinance their homes;
• Litigation creates uncertainty in the minds of potential buyers and mortgage lenders which results in them placing a lower value on all units or lots in the entire association;
• Most insurance policies today are burning limits policies which means that attorney fees and costs paid by the insurance company to the law firm are deducted from the policy limit. This means that an association's insurance coverage declines with every dollar spent on legal fees and related costs. This can put an association into a dangerous position;
• Even when an insurance company pays a claim, the dollar amount of the settlement and legal costs is recorded and directly affects future insurance premiums as well as the insurance company's willingness to renew the policy;
• In most cases, the higher the level of accrued legal fees and costs, the more difficult it is to settle a case. This is because the other party has also spent about the same amount of money and wants to recover it;

A litigation manager can save board members hundreds of hours of uncompensated time.

In short, everything that can reasonably be done to minimize unnecessary litigation in order reduce legal fees and costs should be done. This will almost always make it easier to resolve a lawsuit.