The facts
Ms. Thomas and her two sisters, Ms. Smith and Ms. Jones, inherited their mother’s rental property after she passed away. Over the next three years, the estate was managed by Creekside Management. During this time, Ms. Thomas and her sisters were unable to come to any agreement about the terms of the contract for the management of the property and were embroiled in several disputes.
Due to the sisters’ constant arguing and indecisions, Creekside Management resigned from management of the property. When Creekside Management resigned, there was $12,000 in the rental account. The account was closed and Creekside Management issued three checks, each made jointly payable to all three sisters, in the amount of $4,000. The checks were picked up at Creekside Management by Ms. Jones, who then deposited the checks. Instead of distributing the funds equally, Ms. Jones split the proceeds with Ms. Smith, leaving Ms. Thomas without her share of the money.
Infuriated at the fact that she was left with no funds, Ms. Thomas filed suit for fraud, conspiracy, negligence, breach of fiduciary duty and trespass, alleging a failure of Creekside Management to properly tend to her interests in the ownership of the property. Ms. Thomas contended that the defendants were liable to her because they allowed their loyalties to Ms. Jones and Ms. Smith to take precedence over their duty to Ms. Thomas. However, Creekside Management stated that it acted in a reasonable way by closing the rental account and dividing the proceeds by three. They issued the checks in this way to avoid the possibility that the three sisters would not participate in the negotiation, endorsement, or distribution of the funds.
The result
The lawsuit went to trial and lasted a year. The suit settled in Ms. Thomas’ favor for $20,000 in damages. Defense costs were $80,000 making the total cost of the suit $100,000. Creekside Management should have been more aware of the legal issues surrounding a situation such as this. It would have been beneficial to have an outside legal party help them make the changes to the contract that worked for all parties.
Risk factors
Risk factor #1
Knowing that a family member is ill, other family members need to discuss the provisions of a contract before inheriting the property.
Risk factor #2
Hiring a third party management company and trying to change the contract without legal help can be a problem. It would be beneficial to have an outside party help make the changes needed for the contract to work for all parties.
*The claim scenario is strictly documented for illustrative purposes only and provides an example of what a policy could cover. It is intended to provide a general overview of the program described. Please remember only the insurance policy can give actual terms, coverage, amounts, conditions and exclusions. Program availability and coverage are subject to individual underwriting criteria.
