Following complaints from residents in a recent Reformer article, property/casualty insurance industry groups are calling on Minnesota Attorney General Keith Ellison to investigate an Otsego homeowners association, its property manager, and a construction company subsidiary. I am requesting it.
Pheasant Ridge Villa homeowners were each charged more than $18,000 to replace their roofs, leading to at least one foreclosure.
In Minnesota, HOAs can issue liens against residents’ homes if they fail to pay dues or special assessments such as roof replacement.
Pheasant Ridge homeowners are especially concerned that the HOA board directed the roofing work to a contractor that is a subsidiary of the property manager.
Aaron Cocking, CEO of the Minnesota Insurance Federation, wrote that the Reformer article “contains serious allegations that warrant further consideration and scrutiny.” .
The article notes that after the July 2023 storm, some residents thought they didn’t need to replace their roof, and that the HOA board and property management company Gassen had been talking about replacing the roof before the storm. I detailed what happened.
“Even more disturbing, if true, are the allegations that the board discussed filing an insurance claim in the weeks before the storm, and that the HOA board president signed a copy of the construction contract seven days before the storm. ” Cocking writes.
The HOA ultimately hired a subsidiary of Gassen to complete the reroofing without seeking proper competitive bids.
Cocking wrote that he does not represent any particular insurance company, but called the deal with Gassen Construction Company “alarming.”
“Without a competitive bidding process, at the very least, there are conflicts of interest; at worst, it provides an avenue for price gouging and insurance fraud,” Cocking added.
Eden Prairie-based Gassen did not respond to a request for comment before the Reformer article was published and did not respond to email or phone messages Thursday.
Ellison’s spokesman, Brian Evans, said the attorney general’s office is reviewing the insurance federation’s letter and will respond, as well as bipartisan legislation examining HOA laws and proposing possible reforms. Raised concerns to the working group. “Attorney General Ellison’s office takes allegations of misconduct very seriously,” he said.
The New York Times reported this year that Minnesota’s homeowners insurance industry has taken a hit recently, losing money in six of the past seven years. The Times report cited an increase in extreme weather events. As a result, policyholders faced rapidly rising premiums.
But the industry also blames widespread fraud. According to the FBI, insurance fraud totals at least $40 billion a year, costing the average American household between $400 and $700 a year.
The Reformer article also highlighted gaps in state oversight of homeowner associations and property management companies, as well as the financial pressures HOAs can place on homeowners.
Affected residents say they have little recourse because they believe HOAs and property managers are making bad decisions.
When the homeowners of the Pheasant Ridge Villas asked about replacing their roofs, their questions ended up being directed to a lawyer, and the residents were charged legal fees. One resident’s HOA bill included $2,000 in attorney fees for the attorney’s responses to questions.
If you believe your homeowners association or property manager is involved in suspicious activity, please contact reporter Madison McVan.
