COLORADO SPRINGS, CO – Heather McBroom moved into the Soaring Eagles Townhomes in May 2025, excited about her new home in Colorado Springs. Three months later, she received a letter that made her blood run cold: she owed the homeowners association $20,752.12—and she had less than two months to pay.
The reason? A hailstorm in August 2024 had caused millions of dollars in damage to the 150-unit community. The HOA's insurance policy carried a deductible of 10% of the community's value—approximately $3.1 million. The HOA board decided to split that deductible equally among all 150 units, resulting in the staggering $20,752 assessment.
There's just one problem: the HOA's own governing documents cap loss assessments at $10,000 or less. But the board approved a deductible that's more than double that limit—without homeowners' knowledge or consent.
Now 21 of the 150 residents are fighting back through a lawsuit, claiming the assessment violates the community's bylaws. The brewing legal battle exposes a critical insurance gap affecting HOA-governed properties across Colorado's "Hail Alley"—and it's a wake-up call for anyone living in a community association.
What Happened: The August 2024 Hailstorm
On or around August 1, 2024, a severe hailstorm pummeled the Soaring Eagles Townhomes on the southeast side of Colorado Springs. The damage was extensive—roofs, siding, windows, and common areas throughout the complex needed repairs.
The HOA filed an insurance claim. The community's property was valued at approximately $31.1 million, and the insurance policy carried a deductible of 10% of that value: $3,112,817.26.
Under typical HOA insurance arrangements, the association pays the deductible and then assesses individual unit owners for their share. In this case, the board divided the $3.1 million deductible equally:
$3,112,817.26 ÷ 150 units = $20,752.12 per unit
The assessment letter, dated August 18, 2025, gave residents until October 1, 2025 to pay—less than six weeks.
For many families, this was financially devastating. Some had personal insurance policies that covered up to $10,000 in loss assessments (the maximum allowed under the HOA's bylaws), but nothing beyond that. Others—including those like McBroom who'd just moved in—had no idea such massive assessments were even possible.
The Legal Violation: HOA Bylaws Cap Deductibles at $10,000
The residents' lawsuit centers on a critical provision in the Soaring Eagles Declaration of Covenants, Conditions, and Restrictions (CC&Rs) dating back to 2006.
Section 7.3 states: The HOA board can only adopt insurance policies with deductibles "greater than the lesser of $10,000 or one percent of the face amount of the policy."
Translation: The maximum deductible allowed under the governing documents is $10,000—or 1% of policy value, whichever is less.
Yet the HOA's actual policy had a deductible of 10% of policy value—ten times higher than allowed.
How this happened:
- In 2006, when the community's declaration was signed, the $10,000 cap was put in writing
- Over the years, Colorado's insurance market hardened, and insurers demanded higher deductibles for hail-prone properties
- The HOA board apparently accepted policies with higher deductibles without amending the governing documents
- Residents who bought homes (like McBroom) purchased loss assessment coverage based on the $10,000 cap in the CC&Rs
- When the hailstorm hit, the reality came crashing down: the deductible was actually $3.1 million
Robert Schifferdecker, the attorney representing the 21 challenging homeowners, told The Denver Post: "My clients are just reeling from the fact that… without their authorization, without their knowledge, and without any power to change it, (they) have been subjected to this astronomical deductible that really just made the HOA itself self-insured."
Why HOA Insurance in Colorado Is Uniquely Challenging
Colorado sits in "Hail Alley"—a region of the United States that experiences some of the most frequent and severe hailstorms in the world. The Denver-Aurora metro area alone saw an estimated $2.3 billion in hail damage on May 30, 2024.
This frequency has transformed HOA insurance in Colorado:
Challenge 1: Insurers Demand High Percentage Deductibles
Standard HOA policies used to carry flat-dollar deductibles ($10,000, $25,000, $50,000). But with hail claims mounting, insurers shifted to percentage-based deductibles: 1%, 2%, 5%, or even 10% of the property's total insured value.
Why this matters: A $25 million property with a 10% deductible means a $2.5 million out-of-pocket cost before insurance pays anything. For a 100-unit HOA, that's $25,000 per unit—before any coverage kicks in.
Challenge 2: Coverage Availability Is Limited
Many insurers have exited the Colorado HOA market entirely or dramatically reduced the number of policies they'll write. HOA boards face a choice:
- Accept policies with high deductibles
- Go without coverage
- Join high-risk insurance pools with even worse terms
Tony Smith, the HOA's attorney, acknowledged this reality: "We understand it's extremely frustrating, but the reality is you can't just go buy that policy in the Colorado market."
Challenge 3: Governing Documents Haven't Kept Pace
Most HOA declarations were written 10-20 years ago when $10,000 deductibles were standard. But insurance markets have changed dramatically, and many boards haven't formally amended their governing documents to reflect new realities.
The result: A disconnect between what bylaws allow and what insurers offer.
Challenge 4: Homeowners Don't Understand Loss Assessment Coverage
Most homeowners with HOA properties carry "loss assessment coverage" as part of their personal homeowner's or HO-6 (condo) insurance. This covers assessments levied by the HOA due to covered losses.
Typical limits: $1,000, $5,000, $10,000, sometimes $50,000
Homeowners at Soaring Eagles who purchased $10,000 loss assessment coverage thought they were fully protected—because the HOA's bylaws capped assessments at $10,000. They had no way of knowing the HOA had accepted a policy that violated its own governing documents.
Four Critical Questions This Case Raises
Question 1: Can HOA Boards Override Governing Documents?
Generally, no—not without following proper amendment procedures.
HOA declarations are contracts among all the property owners. The board can't unilaterally change material terms without a vote of the membership (typically requiring 51-75% approval, depending on the bylaws).
By accepting insurance policies with deductibles far exceeding the $10,000 cap, the Soaring Eagles board arguably breached its fiduciary duty and violated the governing documents.
Possible defenses the HOA might raise:
- No other insurance was available
- Residents were notified (though the lawsuit disputes this)
- The board acted in good faith based on advice from insurance professionals
But "we had no choice" typically isn't a valid defense for violating written governing documents.
Question 2: Are Residents Liable for Assessments That Violate Bylaws?
This is the central legal question. If the assessment violated the CC&Rs, residents may not be legally obligated to pay it.
Residents' argument: The HOA's governing documents created a contract limiting loss assessments to $10,000. The board exceeded its authority by approving higher assessments.
HOA's counterargument: The board had no choice given market conditions, and residents are bound by decisions made in the community's interest.
Courts will likely balance these competing interests, but residents have a strong argument that bylaws should be enforced as written.
Question 3: Who Bears the Financial Loss If the Assessment Is Voided?
If a court rules the $20,752 assessments are invalid, someone still has to pay the $3.1 million deductible. Options:
- The HOA's reserves (likely insufficient)
- A special assessment capped at the legal $10,000 limit (leaving $1.6 million unpaid)
- The insurance carrier (if the policy was improperly issued)
- The HOA board members personally (if they breached fiduciary duties)
This is why HOA boards must understand their insurance policies and keep them aligned with governing documents.
Question 4: What About Residents Who Already Paid?
Some Soaring Eagles residents, fearing penalties or liens on their properties, have already paid the $20,752 assessment. If the assessment is later ruled invalid, getting refunds could be complicated—especially if the HOA has already spent the money on repairs.
Five Actions HOA Homeowners Must Take
Action 1: Read Your HOA's Governing Documents Today
Don't wait until disaster strikes. Find your declaration, CC&Rs, and bylaws (usually provided at closing or available from your management company).
Look for:
- Loss assessment limits
- Deductible caps
- Insurance coverage requirements
- Amendment procedures
If your documents cap assessments at $10,000 but your HOA has a $500,000 deductible, you have a problem—address it now, not after a hailstorm.
Action 2: Review Your Personal Loss Assessment Coverage
Check your homeowner's or HO-6 policy. How much loss assessment coverage do you carry?
If your coverage is less than potential HOA assessments:
- Increase your coverage (usually inexpensive)
- Demand the HOA board align its insurance with governing document limits
- Budget for the possibility of large assessments
Action 3: Attend HOA Meetings and Ask About Insurance
Most homeowners ignore HOA meetings until problems arise. Don't make that mistake.
Questions to ask your board:
- What's our current insurance deductible?
- How does it compare to our governing documents' limits?
- How would a major loss be funded?
- Do we have adequate reserves to cover potential deductibles?
- When was the last time governing documents were reviewed for insurance compliance?
If the board can't answer these questions, push for a professional review.
Action 4: Demand Amendments If Needed
If your HOA's insurance violates governing documents, demand the board either:
- Change to a compliant policy
- Formally amend the governing documents through a membership vote
Don't let boards operate in a gray area. Either the bylaws should be followed, or they should be formally changed—with full transparency to all owners.
Action 5: Consider an Umbrella Policy
For homeowners in high-risk areas (Colorado hail zones, Florida hurricane regions, California wildfire areas), an umbrella policy provides additional liability and loss assessment coverage beyond standard homeowner limits.
Cost: Usually $200-500/year for $1-2 million in additional coverage
Benefit: Protection against catastrophic assessments like the $20,752 bills Soaring Eagles residents received
The Broader Lesson: Insurance Markets Are Changing Fast
The Soaring Eagles situation isn't unique. Across Colorado—and in other disaster-prone states—HOAs are facing impossible choices:
- Accept policies with deductibles that exceed bylaw limits
- Go without coverage
- Raise dues dramatically to build reserves for potential deductibles
The insurance crisis is real. Climate change is increasing the frequency and severity of hailstorms, wildfires, and hurricanes. Insurers are responding by raising rates, increasing deductibles, and leaving high-risk markets.
But HOA boards can't simply ignore governing documents because the insurance market has changed. Proper procedure requires:
- Acknowledging that current insurance exceeds bylaw limits
- Explaining the situation to all homeowners
- Proposing amendments to governing documents
- Voting to approve changes
- Only then accepting non-compliant policies
Transparency and proper procedure protect both boards and residents.
Next Steps: Protecting Yourself in an HOA
If you're buying in an HOA:
- Request copies of governing documents before closing
- Review insurance requirements and deductible limits
- Ask for current insurance policy details
- Purchase adequate loss assessment coverage
If you already live in an HOA:
- Review your documents and insurance annually
- Attend meetings and ask tough questions
- Demand transparency about insurance decisions
- Consider legal action if the board violates governing documents
If you're on an HOA board:
- Ensure insurance policies comply with governing documents
- If compliance is impossible, follow proper amendment procedures
- Communicate openly with residents about insurance challenges
- Consider consulting an attorney before accepting non-compliant policies
The Soaring Eagles residents are learning an expensive lesson: when HOA boards exceed their authority, homeowners pay the price. Don't let it happen to you.
Source: The Denver Post, KOAA News, KRDO, Robinson & Henry Law