Concerns for Condos
By JAY ROMANO
Published: February 29, 2004
A RULING issued by a Manhattan Supreme Court Justice last
month could have significant ramifications for condominium
unit owners in New York, some real estate lawyers and
insurance specialists say.
The ruling basically holds that individual condominium
unit owners can be held personally liable for all or part
of the damages awarded to people injured as a result of
defects in common areas of a building.
This, the lawyers say, presents an important departure
from the traditional legal understanding that like co-op
corporations, condominium associations — rather
than individual apartment owners — are ultimately
responsible for damage awards for injuries sustained in
or caused by parts of the building that are owned in common
by the apartment owners. Moreover, they say, the ruling
could also make it necessary for both condominium associations
and individual unit owners to purchase large amounts of
additional insurance to cover the newly expanded exposure
"This is a very significant case," said Marc
Luxemburg, president of the Council of New York Cooperatives
and Condominiums. "If this judge is right, condominium
owners are going to have basically unlimited exposure
to personal liability for injuries caused by defects in
common areas. In addition, it will almost certainly drive
up the cost of insuring a condominium."
Wayne Batcheler, a Manhattan lawyer who represented a
unit owner in the case, agreed. "This works a huge
revolution in the personal exposure of condo owners to
liability," he said. "If this case stands, individual
condo owners will be on the front lines of every liability
case filed by trial lawyers. If somebody slips and falls
in the lobby, suddenly every condominium unit owner becomes
a potential defendant and has to go out and hire a lawyer."
While such statements may sound alarmist, condominium
lawyers maintain that the ruling reflects such a pronounced
change in the status quo that it is not far-fetched to
suggest that unit owners could be individually named in
almost any liability lawsuit filed against a condominium
Mr. Batcheler noted that the ruling potentially makes
individual unit holders "jointly and severally"
liable for damages.
"That means that every owner can be found responsible
for the entire amount," he said. "The trial
lawyers will go after the owners with the deepest pockets."
The ruling was issued in one of a pair of lawsuits filed
on behalf of Michael Taratuta, who received serious head
injuries in July 2001 when a piece of chain-link fence
fell off the roof of a building at 69 West 106th Street.
In the first suit filed, Mr. Batcheler said, the condominium
association, its board of managers and the original sponsor
of the building — an 11-unit condominium —
were named as defendants. Later, the plaintiff filed a
second lawsuit. "Apparently, they discovered that
the condominium had only $2 million in liability insurance
and they didn't think that was enough," he said.
"So, in July of 2002, they sued each unit owner individually."
That, he said, makes this case different from any other
New York personal injury case involving a condominium.
Mr. Batcheler said that traditionally whenever a person
is injured as a result of a defect in a condominium's
common elements, the injured party would sue the condo
association, the board of managers and, sometimes, the
original sponsor. If the injured party wins a damage award,
he said, the amount awarded is typically paid by the condominium
association's insurance, with individual board members
being legally insulated from judgments if the insurance
coverage is not sufficient to cover the damage award.
This, however, is the very reason that the plaintiff in
this case filed suit against the individual unit owners.
Anthony Gair, a Manhattan lawyer who represented Mr. Taratuta,
acknowledged that given his client's serious, permanent
injuries, the $2 million in insurance coverage would not
be enough to adequately compensate the client.
"If I tried the case to judgment and got a judgment
for more than $2 million, whom do I enforce the balance
of the judgment against?" Mr. Gair said. In other
words, if a plaintiff can sue only the condominium association
and its board of managers, and if the board members cannot
be held personally liable, then the only other place the
plaintiff could get compensation from would be the condominium
association. But because of the way condominium buildings
are owned, the condominium association basically has no
In a co-op, by contrast, since a corporation owns the
building, when a judgment is rendered against the corporation,
any damages that are not covered by insurance can come
out of the corporation's assets, Mr. Gair said, even if
that means selling the building itself.
With a condominium, however, individual unit owners each
own their apartments as well as a proportionate interest
in the building's common elements. The condominium association
owns nothing. So, Mr. Gair said, any judgment against
the association — or its board — is enforceable
only up to the amount of insurance the building carries.
As a result, Mr. Gair said, since the unit owners are
the legal owners of the common areas, it makes sense that
they should be responsible for injuries caused by defects
in those areas.
In fact, Mr. Gair said, if individual unit owners cannot
be held personally liable and if board members cannot
be held personally liable and if the condominium association
itself has no assets, a condominium building would be
basically "judgment proof" for injuries caused
by common elements.
Apparently, that argument was compelling. On Jan. 8, Supreme
Court Justice Sherry Klein Heitler issued a ruling on
a motion filed by the unit owners seeking to have the
case against them dismissed. They argued that since the
state's Condominium Act places responsibility for the
common elements with the board of managers and since unit
owners have no control over the common elements, it is
the board — not the unit owners — that should
be responsible for any liability that results from defects
in common elements.
Justice Heitler disagreed. "It is well settled that
in order for an owner to escape liability, an owner must
relinquish control, management and ownership," she
wrote in her rejection of the unit owners's arguments.
"Defendants have entered into a contract for management
services with the board; they have not relinquished any
As a result of that ruling — which is being appealed
— the case is set to go to trial with the unit owners
as defendants. If the plaintiff prevails, it is conceivable
that the unit owners may be held liable for any amount
exceeding the $2 million in coverage.
In addition, it is unclear whether a unit owner's insurance
policy will be of any help. Michael Zeldes, a senior vice
president for Kaye Insurance Associates in Manhattan,
said it is difficult to predict how carriers will react
to claims against individual unit owners.
"Our feeling is that most reputable homeowner's insurance
carriers would provide a legal defense," Mr. Zeldes
said. "But with no precedent for this type of claim,
it's hard to say whether they will agree to pay any resulting
While there are uncertainties about unit owners' ability
to obtain coverage for injuries that occur in areas outside
their apartments, it is clear that if the ruling stands,
condominium associations will have to make sure they have
enough coverage to reduce the potential for damage awards
coming out of unit owners' pockets.
"But how much is enough?" asked Mr. Luxemburg,
the president of the co-op and condo council. "You
could have $10 million in coverage, but even that's not
going to be enough when the plaintiff gets a judgment
for $20 million. In this day of telephone-number recoveries,
you can never really say how much coverage is enough."
Copyright 2004 The New York Times Company