An overstated collection letter put an association outside its own insurance
An overstated collection letter put an association outside its own insurance
2026-09-15 · New Mexico · Courts
This is the single most practically important appellate decision of the period for a New Mexico association board, and it sits on the most routine thing associations do: collect assessments.1
The case
New Hampshire Insurance Co. v. TSG Ski & Golf, LLC, No. 23-1248, 128 F.4th 1337, decided February 24, 2025 by the United States Court of Appeals for the Tenth Circuit. Published, and binding in the District of New Mexico. The substantive law applied is Colorado's, because the case originates there.
The Peaks is a mixed-use condominium building in Mountain Village, Colorado — roughly 177 residential units, 14 commercial units and 26 penthouse units — governed by an owners association.
Through outside counsel, the association and affiliated entities circulated a debt-collection letter not only to the alleged debtor but to “all individual members of the POA, and numerous third parties (including leaders of the local business community).” The letter asserted more than $15.5 million in unpaid assessments and stated there was no evidence the owner had ever been assessed or paid operating dues.
Board members later testified at trial that when the letter went out they knew assessments had been paid, and that the $15.5 million figure did not account for them.
What it cost
A jury found for the owners on all claims that reached trial, including breach of fiduciary duty, awarding $225,000 in compensatory damages plus $2,298,225 in statutory attorney fees and $328,510.53 in costs.
Then the insurers won summary judgment that they owed neither defence nor indemnity. The Tenth Circuit affirmed in full.
Why the coverage disappeared
“we hold that even though the claims against the insureds did not require proof that the alleged false statements were made knowingly, the knowledge-of-falsity exclusions preclude defense coverage because the underlying complaint alleged that the insureds knowingly published the false statements. And we hold that the exclusions preclude indemnity coverage because the evidence at the underlying trial established that the insureds knowingly published the false statements.”
“The testimony of several POA board members who approved the debt-collection letter established that they knew the Underlying Plaintiffs did not owe $15.5 million in unpaid assessments.”
And the bad-faith claims against the insurers collapsed with the coverage: those claims “flow from the denial of coverage and 'must fail' if coverage was properly denied.”
The imputation point
The court applied ordinary agency principles: knowledge obtained by agents within the scope of their agency is imputed to the principal, and acts of officers within the scope of their authority are the acts of the corporation.
So what individual directors knew became what the association knew. A board member who understands that a balance is overstated carries that knowledge into the association's insurance position, whether or not anyone else on the board shares it.
The three conditions that produced this
The letter went beyond the debtor. Circulating it to the whole membership and to outside business figures is what converted a collection demand into a publication claim. A demand sent to the owner and their counsel does not raise this problem.
The complaint alleged knowledge of falsity. That alone defeated the duty to defend — even though the underlying claims themselves did not require proving knowledge. The duty to defend is decided on what is alleged.
Trial testimony established knowledge. That defeated indemnity.
What changes for a New Mexico board on Monday
Send collection correspondence to the owner, not to the community. Whatever the transparency argument for telling members who is delinquent, the moment a figure a board member knows is wrong reaches an audience beyond the debtor, the association is in publication territory and its own policy may not follow it there.
Reconcile before demanding. The board must be able to say the figure is right. “Our manager produced it” is not an answer when directors' knowledge is imputed to the association.
Treat a disputed balance as a reason to pause. Where an owner has raised a credit, a payment or a crediting mechanism the association has not accounted for, that is exactly the fact pattern here.
Read the policy's exclusions. Knowledge-of-falsity exclusions are standard. A board that assumes its general liability policy covers whatever the association does is assuming something this decision disproves.
Why it matters more in New Mexico than it might elsewhere
New Mexico's association lien arises when an assessment or fine becomes due and “may be foreclosed in like manner as a mortgage on real estate,” with no statutory minimum amount, no minimum delinquency period and no carve-out for fine-only debts — a 2025 bill that would have added all three died in committee.
So New Mexico boards have unusually broad collection powers and, after this decision, a clear demonstration that exercising them carelessly can leave the association paying the judgment, the fees and the costs itself.
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