A logical question is; why would a home or condominium owner’s association need workers compensation insurance?
1. We’re not an employer
2. We don’t have any employees
3. The association is served by volunteer board members
4. The property management company hires all service providers – landscapers, painting contractors, etc.
While all of the above points may be true under the eyes of California law community associations have been treated like commercial enterprises. When outsourcing for service providers, even when done through a property management company, associations may be held partially or fully liable for work related injuries sustained by service providers. Injuries to association board members and volunteers working at the direction of the board may also be the responsibility of the community association if sustained while carrying out association business.
Most Covenants, Conditions & Restrictions (CC&R) documents require community associations to carry workers compensation coverage. Given the potential for significant financial losses board members who ignore this provision risk: depletion of association reserve funds; requirement of a special assessment to pay for losses incurred; legal entanglements between the association, property management company and service provider; and, lawsuits by unit owners directed at board members for negligence.
The Issues
Uninsured service providers
- Any association that uses an uninsured service provider of any kind – handyman, painter, roofer, landscaping – does so as enormous financial risk. In these situations it would be clear that the association is the “employer” and would be responsible for work related injuries which may include costs for hospitalization, rehabilitation, loss of wages and other expenses.
- Most associations/property management companies have a requirement to use only licensed and insured service providers. The service provider “proves” that they have workers compensation insurance by providing a certificate of insurance that describes the coverage they have and when it begins/ends. While this may seem like you have your bases covered you can easily get a false sense of security.
1. The certificate may indicate they have general liability coverage, but if it doesn’t specifically state they have workers compensation coverage, they don’t have it. A person unfamiliar with insurance coverage and documents could easily make this mistake.
2. To ensure service providers continue to maintain their insurance coverage the association or management company needs a system to obtain updated certificates upon policy renewals. While this is a good practice it is not foolproof. You could be holding a certificate of insurance indicating a service provider has coverage during the period of time you plan to use services. However, you would have no way of knowing that the service provider failed to keep up with his payments and allowed the policy to lapse! There is no way to tell this from the certificate of insurance.
3. Sometimes associations must react quickly to an emergency situation such as a water pipe burst at 3am on Saturday morning. It is unlikely that the property manager would be available so you do what you have to do. In this circumstance there may not be time or no one thought to ask the plumber for a certificate of insurance.
Board Members and Volunteers
- A board member who in injured during the execution of his/her duties may be eligible for compensation. For example a board member is conducting the monthly safety inspection of the complex trips on a sprinkler head and breaks his/her knee cap during the fall. This person could pursue compensation as the injury was sustained while involved with duties on behalf of the association.
- Volunteers working at the direction of the board may also be eligible for compensation if injured as a result of carrying out those responsibilities. For example the board directs a volunteer to purchase poster paper from a local office supply store to make signs for a community event. While driving back from the store the volunteer is involved in an auto accident and is seriously injured. The injured volunteer could pursue compensation as the injury was sustained while involved with duties on behalf of the association.
Conclusion
As asset protection professionals it is our experience that every community association should have workers compensation insurance, whether the CC&Rs require it or not. A property management company may carry workers compensation insurance, but that policy will not cover your community association. Our agency has considerable experience providing general liability and workers compensation insurance to contractors of all stripes. While most are responsible business people there are a fair number that have policies lapse for a number of reasons. A community association depends on various service providers to maintain the quality of living and value of the complex. For the small premium a workers compensation policy would cost it simply makes good sense to avoid a pay-out that could ultimately cost the association hundreds of thousands of dollars.