By Gary Deck, CAIS, LLC
Why Every Community Associations Needs a Workers Comp Policy
PROTECTING THE MANAGER AND THE ASSOCIATION
Even though all Community Associations should only hire licensed insured contractors, we know this does not always happen. By hiring uninsured venders or contractors the Management Company and the Association can be held liable for workers comp claims submitted by their vendors.
To protect the Management Company and the Community Association against unwanted workers comp claims the association should purchase a 0 payroll (referred to as an “if any”) workers comp policy. Many managers and association board members think that since their association does not have employees, they do not need workers comp coverage. California Court of Appeals case, Heiman v. Workers Compensation Appeals Board proves that associations and Management Companies can be held liable for vendors that are injured working for a community association. A workers comp policy provides a “backstop” should a contractor's policy fail. Both the Management Company and the Association are protected with a workers comp policy.
Management Companies should amend your contract
Because of the potential “shield” this “if any” backstop provides for you as the manager, you might seriously consider rewriting your contract to require your clients to carry this coverage. Most management contracts that I’ve seen require the association to carry Directors and Officers (D&O) and General Liability (GL) insurance. Because of the far-reaching consequences of this case, Workers’ Compensation should be a required coverage in your management contract.
Coverage for volunteers
In addition to the "if any” exposure addressed in this case, the Association and the Management Company are at risk of owing workers’ compensation benefits to injured volunteers who perform “work” on behalf of the Association. Imagine these scenarios: An association member volunteering at a “Saturday Community Clean-up Day” is injured, or a Board Member slips and falls during a site inspection. While the General Liability policy provides “bodily injury” coverage, bodily injury to an “employee” is specifically excluded so the exposure can be pushed to a workers’ compensation policy. A volunteer performing work on behalf of the Association could easily be construed as an "employee” by the GL carrier, especially if the injuries are significant. To cover volunteers, board members and committee members the association must purchase a workers comp policy that extends coverage by endorsement to volunteers. Without volunteer coverage the associations volunteers are NOT covered.
If they refuse to buy
Sometimes, good Boards make bad decisions. All they see is someone else (this time the insurance guy) sticking it to them for another $352 to insure for some highly unlikely incident. Sadly, that will be the perception of some of your clients. The best thing you can do is present the details of this case California Court of Appeals case Heiman v. Workers Compensation Appeals Board (available at Davis-Stirling.com website), explain the coverage opportunity for the exposure, and recommend that they buy coverage. If all that fails to inspire them to buy coverage, all you can do is protect yourself if they say “no” is to have the association board sign a “refusal/rejection of coverage” letter. The associations broker/agent should keep a copy for if and when a workers comp claim arises.
Until recently, this type of complete workers’ compensation policy for common interest developments has been tough to come by. While some carriers offer coverage for the “if any” exposure, they do not offer coverage for volunteers. Other policies provide “if any” coverage and only offer coverage for Board Members, recommending that you simply extend the definition of “board” via appointed committee. It is important that the policy obtained offer coverage for both the “if any” exposure and ALL volunteers working at the direction of the Board.
All Management Companies and Associations should follow these recommendations:
- Hire only licensed and insured contractors
- Purchase an “if any” workers comp policy with volunteer coverage.
Insurance agents who insure Community Associations should offer their clients a workers comp policy that includes coverage for volunteers every year at renewal and keep a signed rejection letter on file incase the Association decides not to purchase this policy.
Gary Deck is the Director of Sales and Distribution at CAIS, LLC. CAIS is a specialty wholesale Broker and national wholesale Managing General Agent and is the National Program Administrator for the PMA Association Workers’ Compensation program. For additional information regarding this article, he can reached at 916-212-8310 or at firstname.lastname@example.org.