UNSETTLING LESSON IN "STRICT LIABILITY" FROM WINDOW GUARD CASE
Achild died from a fall from a Brooklyn cooperative in 1994. The Department
of Health inspected the building and found that windows guards in nine
of the apartments were improperly installed or that screws holding them
in place were loose. Violations were issued and the building immediately
corrected all the deficiencies.
Almost two years after the tragedy, the City brought criminal charges
against three corporate officers for "failure to properly install
and/or maintain window guards."
Stunned at being accused of criminal action, the board petitioned the
court to have the criminal charges dismissed. Their attorney argued that
as volunteers running the building to the best of their ability, they
should not be held criminally liable for building violations where no
willful wrong act was committed. But, following the "strict liability"
provisions of the law, Judge Kathryn Smith declined to dismiss the criminal
charges and sent the case to trial. In a subsequent negotiation, the building's
manager pled guilty to a criminal misdemeanor and all charges were dropped
against the board members. As is customary in such cases, a fine was imposed
and paid by the cooperative.
Many sections of the Health Code, the Fire Code and the Building Code
are strict liability statutes, giving the City the option of pursuing
owners for criminal as well as civil penalties. When violations are brought
against a corporation that owns property, charges are also filed against
the individual or individuals listed as responsible for that building
on its multiple dwelling registration, which is filed with the City. In
this particular case, because the multiple dwelling registration had not
been updated to name the current manager, the City pursued the corporate
Judge Smith rejected the board's defense that as volunteers they simply
hired the manager to run the building for them. "The decision to
prosecute and the determination of what charges are to be brought are
solely matters within the discretion of the People," she opined,
further stating that, "it is well settled that a corporation acts
only through the individuals who act on its behalf, including its officers,
and that a corporate officer cannot escape individual criminal liability
for violations of the law."
BOARDS MUST BE CONSCIENTIOUS
This widely-reported incident has been a harsh wake-up call for directors
and officers of New York cooperatives and condominiums. CNYC joins the
chorus of those advising that, while there is no need to panic, board
responsibilities are not to be taken lightly.
Boards must pay careful attention to all aspects of operating their buildings.
With the help of management and other appropriate professionals,you should
develop a calendar of requisite filings, inspections and notices.Document
through the corporate minutes when you instruct management to perform
each of these tasks, and verify that the work has been done. When problems
arise, attend to them quickly.
PROTECT YOUR BOARD WITH FULL INSURANCE
You will also want to review your directors and officers liability coverage,ensuring
that the corporation indemnifies directors so that there is no personal
exposure and that the D&O policy would cover the cost of a defense
in a criminal proceeding such as this one. Several insurers have advised
cooperatives that they will not cover costs associated with defending
criminal liability cases. Others do provide coverage; none will reimburse
criminal fines or penalties.
CNYC SEEKS LEGISLATIVE REMEDY
CNYC is committed to changing the laws that give rise to this unfortunate
decision. As this legislation is developed, we will need the grass-roots
support of our members to ensure its passage.