September 2010


On Friday, June 25, 2010, Martha Ruoff passed away.  Yes, that’s “Ruoff” – a name familiar to nearly everyone in the common interest development community.  If you don’t know, Ms. Ruoff experienced an extremely unfortunate accident at a condominium project which resulted in a gut-wrenching lawsuit and landmark appeal: Ruoff v. Harbor Creek Community Assn. (1992) 10 Cal.App.4th 1624,13 Cal.Rptr.2d 755.  Martha was a guest at a condominium project on August 9, 1988 when she slipped and fell down a stairway in the common area of the 152-unit complex.  Martha never recovered.  In fact, for twenty-two years she was cared for by her devoted husband and family. 

Enough years have elapsed since the event that we tend to refer to the Ruoff case casually, but it was truly a terrible incident. Martha fell backwards, landing at the bottom of the stairs, her foot wedged in a gap between the side of the building and the edge of the stairs. Comatose and bleeding, she was transported by ambulance to the hospital and admitted to the intensive care unit (ICU) where she was treated for multiple skull fractures. Due to complications, she underwent partial amputation of her left thumb, index and middle fingers. A month after the accident, doctors inserted a feeding tube. A month later, a shunt was inserted in her spine for draining fluids. Martha remained in a coma. A tracheotomy tube, inserted at the time of the accident, was not removed for two and one-half months. After 107 days in the ICU, Martha was transferred to the Rehabilitation Institute of Santa Barbara, where she underwent treatment and therapy for eight months after which the Ruoffs were no longer able to pay for the institutional care.

Financially wiped out, her husband moved Martha home, where he personally cared for her. She was unable to bathe, dress or feed herself. Her prognosis included "permanent memory loss, gait disturbance, incontinence and other severe neurological abnormalities." As cited in the Appeal Court decision, her only communication abilities were described as "babble." She required 24-hour-a-day care and did for the rest of her life. Her husband sued Harbor Creek to cover the resulting medical expenses which had exceeded $750,000. 

At the time, Harbor Creek Community Association only maintained $1,000,000 in general liability coverage – but the damages were far in excess of their liability coverage.  The Association’s attorney argued that $1 Million was “sufficient.”   An Appeals Court, however, determined that not only was the liability insurance woefully inadequate, but individual owners were personally responsible for the shortfall:  “The individual owners within Harbor Creek, as tenants-in-common of the common area, are subject to the same duties to control and manage their property as are other property owners.”

The Ruoff case sent shudders throughout the common interest development community, leaving industry professionals to wonder how the Appeals Court could justify piercing the “corporate shield” to go after the separate interest holders?

In response to this ruling, in1994 the governor signed Senate Bill 2072 which added Section 1365.9 to the Civil Code.  This code section provided that no person, solely by reason of an ownership interest in a common interest development, shall be personally liable to any person who suffers injury, property damage, or loss arising out of use of the common area provided that the association manages and maintains the common area and the association maintains a general liability insurance policy in the prescribed minimum limits. 

This law provides that any action in tort arising out of the alleged acts or omissions of the managing association of the common interest development must be brought against the association and not against the individual owners of the separate interests provided the association has maintained one or more policies of insurance with specified coverage in specified minimum amounts.  The minimum prescribed limits for a General Liability policy are:

(A) At least two million dollars ($2,000,000) if the common interest development consists of 100 or fewer separate interests.

(B) At least three million dollars ($3,000,000) if the common interest development consists of more than 100 separate interests.

While this code section’s intent is to “offer civil liability protection to owners” in common interest developments, it is naïve to believe that maintaining the prescribed limits is sufficient.   If Martha Ruoff’s accident provides us with any lesson at all it’s that health care is expensive and if long term, round-the-clock care is necessary, settlements can easily reach the multi-million dollar range.   Martha’s husband wasn’t being greedy, he was just trying to receive compensation for a nurse 24 hours-a-day, seven days a week for the rest of Martha’s painful and troubled life.

Plus the “immunity” isn’t absolute and may be providing a false sense of security.   If there is a judgment in excess of the aforementioned prescribed $2 Million or $3 Million limits, the association will still be liable for the rest of the judgment.  The protections granted by the civil code Section 1365.9 only extend to the owners as individuals.  There can STILL be a special assessment levied against each owner in the project for any shortfall.  And, like any other special assessment, if this one isn’t paid the Board can foreclose.  For this reason boards should be encouraged to maintain liability limits well in excess of the prescribed limits – and owners within the development should be encouraged to have sufficient loss assessment coverage to protect against a shortfall.


By Timothy Cline, CIRMS

Timothy Cline Insurance Agency, Inc.

Need a Quote?
This letter contains only a general description of coverage and is not a statement of contract. For a more detailed description of the policy conditions and exclusions, please consult the policy itself.
For more information please visit us at:
or call us today at: (800) 966.9566