An exculpatory clause in the covenants of a Morgan County subdivision protects the local homeowners’ association from a complaint for damages filed by three residents, the Indiana Court of Appeals has ruled.
As part of the covenants and restrictions of Foxcliff Estates in Martinsville, the HOA was charged with the upkeep of common areas and with enforcement of the subdivision’s restrictions. But an exculpatory clause further held the HOA could not be held liable for damages “of any kind to any person for failure to either abide by, enforce or carry out any of the Restrictions.”
Beginning in 2013, Quinn Whitney and Robert McAdams complained to the HOA about drainage problems on their properties, alleging runoff that was causing irreparable damage to their homes. In response, the HOA told Whitney multiple times that it was his responsibility to address the drainage issues because the association was not responsible for diverting water flow.
However, the HOA did conduct an investigation and determined the water was originating from Chad Gregory’s property, and also informed Paul and Mary Harnishveger that water flow was being blocked in their driveway and the drainage pipe needed to be cleared. Whitney and McAdams, however, sued the HOA, alleging breach of contract and failure to exercise reasonable care in the performance of its duties under the covenants.
The association responded with a third-party complaint against Gregory and the Harnishvegers, while Whitney and McAdams moved for partial summary judgment and declaratory judgment that the HOA had a “non-delegable duty … to maintain and repair the drainage ditch … .” The HOA filed a cross-motion for summary judgment, arguing the exculpatory clause barred the complaint for damages.
The Morgan Superior Court entered summary judgment in favor of the HOA, agreeing the exculpatory clause barred the complaint. The Indiana Court of Appeals upheld that decision Friday, with Judge Terry Crone writing that none of the recognized exceptions to enforceable exculpatory clauses applied to the case.
The first exception, unequal bargaining power, did not apply here because there was no evidence of a “great disparity” between the homeowners’ bargaining power and that of the HOA, Crone said. Unlike a residential tenant dealing with a landlord, a homeowner has numerous options when choosing to purchase a home, including the option of moving somewhere with a different set of covenants, he said.
Further, the court dismissed the argument that the exculpatory clause was in an “inconspicuous location” making it unconscionable, the second exception. Finally, “(n)either the operation of the HOA nor the private services that it provides to the residents of Foxcliff Estates are matters of public concern or indispensable necessities,” the court said, defeating the third exception.
“In other words, there is no public policy impediment to the parties agreeing that the not-for-profit HOA … cannot be sued for damages ‘for failure either to abide by, enforce or carry out any of the Restrictions,’” Crone wrote.
The case is Robert A. McAdams, Quinn Whitney and Vonda Whitney v. Foxcliff Estates Community Association, Inc.; Foxcliff Estates Community Association, Inc. v. Paul Harnishveger, Mary Harnishveger, et al., 55A04-1707-PL-1707.