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Are Your Volunteers Protected by Your HOA’s Current Insurance Policies?Here’s a Hint…Probably Not.

06/01/2019 4:23 PM | CAI Rocky Mountain Chapter (Administrator)

By Ella Washington, Ella Washington Agency, Inc.

Homeowner association boards face a lot of decisions when it comes to finances. Those decisions involve the responsibility of trying to keep their association within a reasonable budget. 

With increased costs of doing business, common interest communities are seeking ways to save money. Having volunteers within their community is becoming more common. Often volunteers will perform services that the HOA would otherwise hire contractors for. Examples of volunteer acts within a community are: pulling weeds, removing snow, or planting a tree. Although volunteers in our homeowner association communities are an incredible asset, it can come with a severe price. Trying to save a little on labor costs can end up costing a community in the long run. Injuries to volunteers don’t happen often, but when they do, they can be extremely costly to an association. According to CAIS*, below are recent claims from a National Workers Compensation program built specifically for common interest developments:

1. President volunteered to maintain light bulbs in a common area and fell from a 14-foot ladder - $65,000 paid claim. 

2. Volunteer assisting in clubhouse renovation injured his back removing the old stove - $20,000 paid claim.

3. Volunteer fell while picking up trash in the community - $16,000 paid claim.

It is a common misconception amongst board members and association managers to think these kind of injuries are covered under the HOA’s General Liability (GL) policy. CAIS* explains that “unfortunately a General Liability policy has specific exclusions for bodily injury to an ‘employee’ because by design, employee injuries are covered under a workers compensation policy. While some minor injuries to volunteers have been paid through the GL policy under ‘guest medical coverage”, it doesn’t take much imagination to see where a GL carrier would use the ‘employee’ exclusion to decline a more serious injury to a volunteer.”

Having volunteers in an HOA is not the only risk associations face. In 2007, a California Court of Appeals case: Heiman v. Workers Compensation Appeal Board, shed light on the potential liability that associations and their managers face when contracting for on-site service and repair. Below are the case details:

Pegasus Management (Heiman), the manager for the Montana Villas Homeowners Association, hired the Hruby Company on behalf of the association to install rain gutters on the association’s common areas. An employee of Hruby was electrocuted and seriously injured on the job. Hruby was uninsured so the injured worker’s case was referred to the CA Workers Compensation Appeals Board (WCAB). The absence of a policy to provide benefits for the injured worker left the Workers Compensation Appeals Board assigning payment obligation to the Management Company (Heiman). Heiman took the ruling to court and the disposition from the CA Court of Appeals is outlined below:

DISPOSITION FROM COURT REPORT

‘Heiman v. CA Workers’ compensation Appeals Board (2007) 149 Cal.app.4th 724

“Hruby and Pegasus were dual employers of Aguilera that are jointly and serially liable for workers’ compensation under the Labor Code. Pegasus was also the agent of the Association, which was a separate legal entity that is liable for workers’ compensation as the principal. Pegasus and the Association were not owners or exempt employers under sections 3351(d) and 3352(h). The WCAB’s decision awards Aguilera workers’ compensation to be paid solely by the Pegasus. We reject that limited conclusion and hold that Hruby is jointly and severely liable with Pegasus and the Association is also liable as Pegasus’ principal. To the extent that WCAB’s decision is inconsistent with our conclusion, it is annulled. The award will otherwise be affirmed.”

An important fact to consider, if the association carried its own workers compensation policy, it’s likely that the Workers Comp Board would have assigned the benefits of that policy to Aguilera and the case would have most likely been settled. 

A traditional workers compensation policy is meant to cover employees who are injured on the job. By definition a “volunteer” is a person who provides services without the expectation of compensation of any kind. Most carriers do not offer coverage for organizations without direct employees. The carriers that do offer the “if any” coverage (meaning no direct employees) typically will not offer coverage for volunteers. Ideally, associations really need to protect themselves from both “if any” and “volunteers” under one simple workers compensation policy.

So how does an HOA protect themselves from such risks? Until recently, there were not many options of a workers’ compensation policy for HOA communities that didn’t hire ‘direct employees’. CAIS* is a carrier that has designed such a policy. CAIS* mentions “it was truly a case of the insurance industry not understanding the niche and the risk associated with the class of business”. The program CAIS* offers was the first of its kind to offer both “if any” and “coverage for volunteers” on a national basis. Local insurance agents offer this “Volunteer” Workers Compensation policy with premiums usually ranging from $350-$400 per year.

As an asset protection professional, it is my recommendation that every common interest community purchase this policy whether or not the CC&Rs require them. Any association that hires contractors for on-site repairs, or work within the community, or has any volunteers should consider this policy. This risk far outweighs the premiums. After all, the trip to an emergency room will well exceed the annual premium of this type of policy.

*CAIS, LLC. helped co-write the information inthis article. For more information 

Ella is a 23 year veteran in the HOA Insurance industry. Her agency has access to over 35 insurance carriers. Ella’s agency was established in 1996. Being an advocate to her HOA Board Members and Managers is always her top priority and is the foundation of her success. The Ella Washington Agency is a national agency insuring HOAs in 19 states.

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