Case Summary
| Case ID | 17F-H1716008-REL |
|---|---|
| Agency | ADRE |
| Tribunal | OAH |
| Decision Date | 2017-01-03 |
| Administrative Law Judge | Diane Mihalsky |
| Outcome | no |
| Filing Fees Refunded | $0.00 |
| Civil Penalties | $0.00 |
Parties & Counsel
| Petitioner | Jerry and Patricia Gravelle | Counsel | — |
|---|---|---|---|
| Respondent | Village Parc Homeowners Assoc. of Havasu | Counsel | Kenneth E. Moyer |
Alleged Violations
CC&Rs Article 11, Section 11.7.3 and 11.7.6
Outcome Summary
The Department adopted the ALJ's recommendation to dismiss the petition. The ALJ found that the HOA's insurance policy and CC&Rs did not require coverage for damage to the Petitioners' individual unit (finished surfaces and personal property) resulting from a sewer backup. The HOA was only responsible for common elements.
Why this result: The CC&Rs explicitly state that the Association is not required to insure personal property within an individual unit and that owners are responsible for their own unit coverage. The ALJ found that past minor payments by the Board for similar damages did not amend the governing documents.
Key Issues & Findings
Failure to provide insurance coverage for unit damages
Petitioners alleged the HOA violated CC&Rs by failing to provide insurance coverage for damages to their unit (interior/personal property) caused by a sewer backup, requesting $6,697.70 reimbursement.
Orders: The petition is dismissed; no action is required of Respondent.
Filing fee: $0.00, Fee refunded: No
Disposition: respondent_win
- A.R.S. § 33-1212(1)
- A.R.S. § 33-1247(A)
- CC&Rs Article 11 Section 11.7.3
- CC&Rs Article 11 Section 11.7.6
Video Overview
Audio Overview
Decision Documents
17F-H1716008-REL Decision – 528194.pdf
17F-H1716008-REL Decision – 528432.pdf
17F-H1716008-REL Decision – 535933.pdf
17F-H1716008-REL Decision – 539997.pdf
Briefing: Gravelle v. Village Parc Homeowners Association
Executive Summary
This briefing synthesizes the key findings and legal determinations from an administrative case between homeowners Jerry and Patricia Gravelle and the Village Parc Homeowners Association of Havasu (HOA). The dispute centered on liability for damages within the Gravelles’ condominium unit caused by a sewer backup.
The petition, filed with the Arizona Department of Real Estate, was ultimately dismissed. The Administrative Law Judge (ALJ) concluded, and the Department Commissioner affirmed, that the HOA’s governing documents—the Covenants, Conditions, and Restrictions (CC&Rs)—unambiguously place the responsibility for insuring the interior of an individual unit on the unit owner, not the HOA.
The ruling established that the HOA’s master insurance policy, provided by Travelers, was only obligated to cover what the CC&Rs required. Arguments based on the HOA’s past payments for minor damages in other units, an erroneous initial statement by an insurance adjuster on a prior claim, and the HOA Board’s own mistaken interpretation of its duties were all found to be insufficient to override the plain written language of the governing documents. The final decision reinforces the principle that unit owners are responsible for understanding their CC&Rs and securing adequate personal insurance for their property.
I. Case Overview and Final Disposition
• Case Identification: No. 17F-H1716008-REL
• Parties:
◦ Petitioners: Jerry and Patricia Gravelle, owners of Unit 14 in the Village Parc development.
◦ Respondent: Village Parc Homeowners Assoc. of Havasu (“the Association”).
• Adjudicating Body: The case was heard in the Arizona Office of Administrative Hearings before Administrative Law Judge (ALJ) Diane Mihalsky. The final order was issued by the Commissioner of the Arizona Department of Real Estate.
• Key Dates:
◦ Hearing Date: November 10, 2016
◦ ALJ Decision: December 22, 2016
◦ Final Order: January 3, 2017
• Final Disposition: The Commissioner of the Department of Real Estate, Judy Lowe, accepted the ALJ’s recommendation and ordered that the petition be dismissed. This constituted a final administrative action, effective immediately. Parties were advised of their right to file for rehearing or appeal for judicial review.
II. The Core Dispute: Insurance for Sewer Backup Damage
On or about October 23, 2015, the Petitioners’ condominium (Unit 14), along with two other units, suffered damage from a sewer backup. The central conflict arose from determining which party was financially responsible for the repairs inside the Petitioners’ unit.
• Petitioners’ Claim: The Gravelles filed a petition on August 31, 2016, alleging the Association violated Articles 11.7.3 and 11.7.6 of the CC&Rs by failing to provide insurance coverage for the full extent of the damages. Their personal insurance policy did not cover sewer backups. They requested the Association pay $6,697.70 to reimburse them for the loss that the Association’s insurer, Travelers, declined to cover.
• Insurance Claim Outcome:
◦ The Association submitted a claim for the sewer backup damages to its insurer, Travelers.
◦ Travelers determined that its policy covered damages to the common elements associated with the unit and issued a check to the Petitioners for $338.64.
◦ Travelers concluded there was no coverage under the policy for damage to the interior of the Petitioners’ unit. This denial was based on the CC&Rs, which establish that the unit owner is responsible for the finished surfaces and personal property within their unit.
III. Analysis of Governing Documents and Legal Framework
The ALJ’s decision was grounded in a strict interpretation of the Association’s CC&Rs, its insurance contract, and the Arizona Condominium Act.
Document / Statute
Key Provisions and Implications
Village Parc CC&Rs
Unit Definition (Sec. 2.2.1): A unit is defined as the space “bounded by and contained within the interior finished surfaces of the perimeter walls, floors and ceilings.”
Insurance Responsibility (Sec. 11.7.3): The Association’s master policy is explicitly “not be required to insure the personal property within any individual Unit, which insurance shall be the responsibility and risk of the Unit Owners.”
Liability Limitation (Sec. 11.7.5): The Association is not liable to any owner “if any risk or hazard is not covered by insurance or the amount is inadequate.” It places the burden on each owner to ascertain the Association’s coverage and procure their own additional insurance.
Travelers Insurance Policy
Conditional Coverage Endorsement: The policy covers certain property (fixtures, alterations, appliances) contained within a unit, but only “if your Condominium Association Agreement requires you to insure it.” Since the CC&Rs do not require the Association to insure unit interiors, this coverage was not triggered.
Primary Insurance: The policy states it is “intended to be primary, and not to contribute with such other insurance” a unit-owner may have.
Arizona Condominium Act
Unit Definition (A.R.S. § 33-1212(1)): Reinforces the CC&Rs by defining finished surfaces—”lath, furring, wallboard… tiles, wallpaper, paint, finished flooring”—as part of the unit. All other portions of walls, floors, or ceilings are common elements.
Maintenance Responsibility (A.R.S. § 33-1247(A)): The law specifies that “the association is responsible for maintenance, repair and replacement of the common elements and each unit owner is responsible for maintenance, repair and replacement of the unit.”
IV. Petitioners’ Arguments and the ALJ’s Rejection
The Petitioners presented evidence of past practices by both the Association and Travelers, arguing these created an expectation of coverage. The ALJ systematically rejected these arguments.
• Argument 1: The Association’s Past Payments for Unit Repairs
◦ Petitioners’ Evidence: The Association had authorized payments for repairs inside other units on prior occasions:
▪ June 2011: $153.74, $75.00, and $296.11 for damage to Units 3 and 5 from a broken shower drain.
▪ January 2012: $449.45 to repair kitchen cabinets in Unit 6 damaged by a broken roof vent.
◦ ALJ’s Conclusion: The fact that the Association’s Board made “actual payments of small amounts for damages to individually owned units” does not legally amend the plain language of the CC&Rs. Notably, the Association did not submit these prior incidents to its insurer.
• Argument 2: Travelers’ Prior Actions
◦ Petitioners’ Evidence: In a 2014 claim, a Travelers adjuster initially determined that the policy did provide coverage for damage done to a unit, not just limited common elements.
◦ ALJ’s Conclusion: Travelers later stated the adjuster had erred and confirmed no claim for unit damage was ultimately paid. The ALJ found that the “adjuster’s initial error in the 2014 claim does not estop Travelers from denying the claim for damages to Petitioners’ unit” in 2015.
• Argument 3: The Association Board’s Own Interpretation
◦ Petitioners’ Evidence: At a November 2015 board meeting, where Mr. Gravelle served as secretary/treasurer, the Board itself determined that the CC&Rs did require the Association to provide insurance coverage for all damages to Unit 14.
◦ ALJ’s Conclusion: The Board’s “erroneous opinion” does not have the legal power to amend the CC&Rs or the binding terms of the Travelers insurance policy.
V. Core Legal Principles and Final Decision
The dismissal of the petition was based on several foundational legal principles.
• Primacy of Written Documents: The decision gave superior weight to the “plain language” of the CC&Rs and the insurance contract over inconsistent past practices or mistaken interpretations.
• Burden of Proof: As the filing party, the Petitioners had the burden to prove by a “preponderance of the evidence” that the Association violated the CC&Rs. The ALJ determined they failed to meet this standard.
• Clear Delineation of Responsibility: Both the CC&Rs and Arizona state law create a clear separation of financial and maintenance responsibilities: the Association is responsible for common elements, while individual owners are responsible for their units.
• Presumption of Knowledge: The decision cited the legal principle that “Everyone is presumed to know the law.” The CC&Rs put the Petitioners on constructive notice that they were responsible for insuring their individual unit against risks like a sewer backup. Their failure to procure such coverage was their own responsibility.
Study Guide: Gravelle v. Village Parc Homeowners Association
This guide provides a detailed review of the administrative case No. 17F-H1716008-REL, involving Jerry and Patricia Gravelle and the Village Parc Homeowners Association of Havasu. It is designed to test and deepen understanding of the facts, legal arguments, and final decision presented in the case documents.
Short Answer Quiz
Instructions: Answer the following questions in 2-3 complete sentences, drawing exclusively from the information provided in the case documents.
1. Who were the primary parties in case No. 17F-H1716008-REL, and what were their official roles?
2. What specific event on October 23, 2015, initiated the dispute between the parties?
3. What was the total monetary amount the Petitioners requested, and for what purpose?
4. According to the Travelers insurance policy held by the Association, what property inside a unit could be covered, and under what specific condition?
5. How did the Arizona Condominium Act (A.R.S. § 33-1212(1)) and the CC&Rs define the boundaries and components of an individual “Unit”?
6. What was the key reasoning provided by Travelers for denying coverage for the interior damage to the Petitioners’ unit?
7. The Petitioners cited past instances where the Respondent paid for repairs in other units. Why did the Administrative Law Judge rule that these “past practices” did not legally bind the Respondent in this case?
8. What is the definition of “preponderance of the evidence” as cited in the legal decision?
9. What was the final, official outcome of the case as determined by the Administrative Law Judge and adopted by the Commissioner of the Department of Real Estate?
10. According to Section 11.7.5 of the CC&Rs, who is ultimately responsible for procuring additional insurance coverage if the Association’s policy is deemed inadequate?
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Quiz Answer Key
1. The primary parties were Jerry and Patricia Gravelle, who were designated as the “Petitioners,” and the Village Parc Homeowners Assoc. of Havasu, which was the “Respondent.” The Petitioners owned a condominium unit and were members of the Respondent homeowners’ association.
2. On or about October 23, 2015, the Petitioners’ Unit 14, as well as Units 15 and 16, suffered damage from a sewer backup. The Petitioners discovered that their personal insurance policy did not provide coverage for this type of damage, leading them to seek coverage under the Respondent’s policy.
3. The Petitioners requested that the Respondent pay $6,697.70. This amount was to reimburse them for the loss that the insurance company, Travelers, refused to cover for the damages inside their unit caused by the sewer backup.
4. The Travelers policy endorsement stated it could cover property contained within a unit, regardless of ownership, under one specific condition: if the “Condominium Association Agreement requires you to insure it.” This included fixtures, improvements, alterations, and certain appliances.
5. The CC&Rs (Section 2.2.1) and the Arizona Condominium Act defined a unit as being bounded by the interior finished surfaces of its perimeter walls, floors, and ceilings. The Act specifies that materials like tiles, paint, finished flooring, and wallpaper are part of the unit, while other portions of the walls, floors, or ceilings are part of the common elements.
6. Travelers concluded there was no coverage for the interior damage because the CC&Rs make the unit owner responsible for damages within a unit. The policy was intended to cover common elements and structural damage, not the finished surfaces and personal property that constitute the interior of the unit.
7. The judge ruled that the Board’s past payments for small damages and its erroneous opinion that the policy should cover the damage did not amend the plain language of the CC&Rs. The legally binding CC&Rs put Petitioners on notice about insurance requirements, and these past actions were not sufficient to override the written documents.
8. “A preponderance of the evidence” is defined as “such proof as convinces the trier of fact that the contention is more probably true than not.” It is also described as “The greater weight of the evidence… sufficient to incline a fair and impartial mind to one side of the issue rather than the other.”
9. The Administrative Law Judge issued a Recommended Order that the petition be dismissed and that no action was required of the Respondent. This recommendation was accepted and adopted by the Commissioner of the Department of Real Estate in a Final Order dated January 3, 2017.
10. Section 11.7.5 of the CC&Rs explicitly states that “Each Owner is responsible for ascertaining the Association’s coverage and for procuring such additional coverage as such owner deems necessary.” It also shields the Association from liability if a risk is not covered or the insurance amount is inadequate.
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Essay Questions
Instructions: The following questions are designed for a more in-depth analysis of the case. Formulate a comprehensive response for each question based on the provided source materials.
1. Analyze the role of the Covenants, Conditions, and Restrictions (CC&Rs) in this case. How did specific sections of the CC&Rs support the Respondent’s position and ultimately lead to the dismissal of the petition?
2. The Petitioners argued that the Respondent’s “past practices” and an initial, erroneous determination by a Travelers adjuster should have set a precedent. Explain what the legal concept of “estoppel” means in this context and detail the judge’s reasoning for why it did not apply to the Gravelles’ situation.
3. Discuss the division of responsibility for maintenance and insurance as defined by the Arizona Condominium Act and the Village Parc CC&Rs. How does this case illustrate the critical distinction between “Common Elements,” “Limited Common Elements,” and the “Unit” itself?
4. Trace the procedural path of this dispute, from the initial petition filing to the Final Order. Identify the key government bodies involved (e.g., Department of Real Estate, Office of Administrative Hearings) and the roles they played in adjudicating the case.
5. Imagine you are advising a new condominium owner at Village Parc. Based on the outcome and reasoning of this case, what advice would you give them regarding insurance policies and understanding their responsibilities versus those of the Homeowners Association?
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Glossary of Key Terms
Definition
Administrative Law Judge (ALJ)
The official (Diane Mihalsky) from the Office of Administrative Hearings who conducted the hearing, analyzed the evidence and legal arguments, and issued a recommended decision in the case.
Arizona Condominium Act
A set of Arizona state statutes that define legal terms and responsibilities related to condominiums. In this case, it was used to define the boundaries of a “unit” versus “common elements” (A.R.S. § 33-1212(1)) and to assign responsibility for their maintenance (A.R.S. § 33-1247(A)).
CC&Rs (Covenants, Conditions, and Restrictions)
The governing legal documents for the Village Parc development. These documents define the rights and obligations of the unit owners and the homeowners’ association, including insurance requirements.
Common Elements
Portions of the condominium project designated for common ownership by all unit owners. Under the Arizona Condominium Act, portions of walls, floors, or ceilings that are not part of the finished surfaces of a unit are considered common elements.
Estoppel
A legal principle defined in the case as meaning “that a party is prevented by his own acts from claiming a right to detriment of other party who was entitled to rely on such conduct and has acted accordingly.” The judge ruled it did not apply because the plain language of the CC&Rs prevented the Petitioners from claiming they reasonably relied on the Board’s or Travelers’ past practices.
Limited Common Elements
A portion of the Common Elements allocated for the exclusive use of one or more, but fewer than all, of the Units. An example given is a “chute, flue, duct, wire, conduit… [that] serve only that Unit.”
Petitioner
The party that filed the petition initiating the legal action. In this case, Jerry and Patricia Gravelle, owners of Unit 14.
Preponderance of the Evidence
The standard of proof required for the Petitioners to win their case. It is defined as “such proof as convinces the trier of fact that the contention is more probably true than not” and as evidence with the “most convincing force.”
Project
As defined in Section 1.27 of the CC&Rs, this refers to “the entire Property… portions of which are designated for separate ownership and the remainder of which are designated for common ownership solely by the owners of the Units therein.”
Respondent
The party against whom the petition was filed. In this case, the Village Parc Homeowners Assoc. of Havasu (“the Association”).
As defined in the CC&Rs, “the elements of an individual unit… which are not owned in common with the Owners of other Condominium Units.” Its physical boundaries are defined as the interior finished surfaces of the perimeter walls, floors, and ceilings.
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Case Participants
Petitioner Side
- Jerry Gravelle (petitioner)
Village Parc Homeowners Assoc. of Havasu
Homeowner; also served as Secretary/Treasurer on the Board in Nov 2015 - Patricia Gravelle (petitioner)
Village Parc Homeowners Assoc. of Havasu
Homeowner
Respondent Side
- Kenneth E. Moyer (attorney)
Law Offices of Kenneth E. Moyer, PLLC
Attorney for Respondent - Gary Himango (affiant)
Village Parc Homeowners Assoc. of Havasu
Submitted affidavit for Respondent
Neutral Parties
- Diane Mihalsky (ALJ)
Office of Administrative Hearings
Administrative Law Judge - Judy Lowe (Commissioner)
Arizona Department of Real Estate - Abby Hansen (HOA Coordinator)
Arizona Department of Real Estate - M. Aguirre (clerk)
Office of Administrative Hearings
Transmitted documents - L. Dettorre (ADRE staff)
Arizona Department of Real Estate
Email recipient (LDettorre@azre.gov) - D. Jones (ADRE staff)
Arizona Department of Real Estate
Email recipient (djones@azre.gov) - J. Marshall (ADRE staff)
Arizona Department of Real Estate
Email recipient (jmarshall@azre.gov) - N. Cano (ADRE staff)
Arizona Department of Real Estate
Email recipient (ncano@azre.gov)
