Question. Can a Home Owners Association (HOA) sue a developer of residential units completed and sold fifteen years ago for indemnification when a resident slips and falls in the street even though the statute of limitations (the time within which a law suit can be commenced) for negligence is three years and for breach of contract six years?
Answer. YES. The answer to whether someone can sue you is almost always yes. However, before thoughts of never-ending liability come into mind realize this does not mean all lawsuits are successful. Unfortunately, even unsuccessful suits must be defended.
The lawsuit we are talking about here arises when the plaintiff slipped on black ice. The plaintiff sued the HOA and the snow removal company. The HOA in turn sued the developer for breach of contract, negligence and common law indemnification. The breach of contract and negligence claims are clearly outside the statute of limitations and will fail. The common law indemnification is viable.
The statute of limitations applicable to a claim of common law indemnification is six years. The concept of common law indemnification (also referred to as "implied indemnification") is rooted in the principal of equity and recognizes that a person who, in whole or in part, has discharged a duty which is owed by him but which as between himself and another should have been discharged by the other, is entitled to indemnity. In other words, if and when the HOA is made to pay for plaintiff's injuries the HOA argues, such payment should have been made by the Developer. Therefore, because of the quasi contractual nature of the indemnification action, the six year limitations period applicable to a breach of contract claim is applied.
However, a cause of action for indemnification is not complete until loss is suffered. This occurs upon payment by the party seeking indemnity. An indemnity claim is a substantive cause of action that is independent of the underlying wrong for which the claim arises out of (i.e. the slip and fall). So the clock on the six year statute of limitations for indemnification does not begin to tick until the HOA is compelled to pay the plaintiff. Nonetheless, asserting such a claim before a loss has been suffered is permissib le.
So we've now established that the HOA can sue. But will they win? In order for a party to establish a claim for common law indemnification, it must be proven (1) that the party seeking indemnification [the HOA] was not negligent, (2) that the person indemnification is being sought from (the indemnitor) [the Developer] was responsible for the negligence that contributed to the injury claimed, and (3) in the absence of negligence, that the indemnitor [the Developer] had the authority to direct, supervise and control the work giving rise to the injury, and that the indemnitor [the Developer] actually exercised such supervision and control.
Common-law indemnification is predicated on "vicarious liability without actual fault," which necessitates that a party who has itself actually participated to some degree in the wrongdoing cannot receive the benefits of the doctrine. So if for example, the HOA failed to properly maintain the sidewalk and street (as is required by many offering plans and municipal codes) and that failure contributed in even the most minute way to plaintiff's injuries, the HOA's cause of action for common law indemnification will also fail. If the HOA is found liable in the main action, it will likely be because it failed in these duties and consequently shares part of the blame. Therefore, it will likely be barred from obtaining indemnification.