Insurance company seeks declaratory judgment over duty to defend homeowners association

An Arizona-based insurance company has asked a federal judge to declare it is not obligated to defend a Hyde Park townhouse homeowners association or pay any claims that may result from a suit brought by a homeowner.

The homeowner who filed the underlying suit claims the association’s board improperly applied a lien against his property following a dispute over his front door.

On Oct. 8, Scottsdale Insurance Co., which is represented by Wheaton attorney Ray H. Rittenhouse, filed suit in Chicago's federal court against the Egandale Homeowners Association and its board of directors, collectively and individually.

In its complaint, Scottsdale asked the federal court for a declaratory judgment releasing it from any obligations related to the underlying suit that the homeowners association has attempted to impose on the company.

The insurance company contends the claims of the case “fall entirely outside the scope” of the liability insurance policy held by the Egandale association.

The dispute between Scottsdale and the homeowners association board stems from a suit Arthur Reliford Jr., a homeowner in the Egandale neighborhood, brought in May in Cook County Circuit Court against the association.

In that complaint, Reliford alleges the homeowners association board, led by president Bob Phillips, slapped a lien on his property without proper cause as part of a personal dispute between the two men.

The dispute allegedly began when Reliford complained to the board about leaks in his home and only worsened after Reliford changed his front door from all glass to a solid green wood security model.

According to facts listed in the circuit court complaint, Reliford changed his front door in 2006, after living for two years in the townhome neighborhood on the west edge of Chicago's Hyde Park neighborhood.

Reliford said he changed the door to provide more security for him and his family, as he said a number of criminal actions had occurred on the streets in front of his home.

He said he believed the door complied with the neighborhood design scheme and codes, nor did he believe the change needed to be approved by the homeowners association.

However, after he and Phillips argued over both the source of water leaking into Reliford’s home, and after Reliford criticized the association for not disclosing the leaks before he moved in, Reliford asserts he received notice from the association that his door was not in compliance with the neighborhood’s aesthetic, and needed to be changed.

Reliford refused, saying the action was outside the purview of the board.

The board in May 2008 voted to place a lien on his house for $4,335. The board, however, did not notify Reliford, who learned of the lien when he attempted to refinance his mortgage and was denied because of the lien.

Reliford filed suit, asking a circuit judge to order the association to remove the lien and to award him $50,000 because, he alleges, the lien was illegal.

In June 2013, the Egandale association board filed a liability claim with Scottsdale Insurance Co. to defend it against Reliford’s action.

The insurance company denied coverage, and has asked a federal judge to back it up, claiming the policy held by the association does not provide for coverage for “any of the claims and counts asserted” by Reliford against the association.

“Scottsdale owes no obligation to defend or indemnify Egandale or any of the Egandale board members for the claims in the underlying action pursuant to the Scottsdale policy,” the insurance company asserts in its complaint.