While it may not seem important at first glance, workers comp insurance is something that every homeowners association should have. This type of insurance policy is essential even if the HOA itself does not have any employees or workers.
Workers Comp Insurance Definition
Workers compensation insurance is a form of insurance that offers wage replacement and medical benefits to employees to suffer injuries while on the job. Employees who receive benefits from workers comp insurance waive their right to file a lawsuit against their employer for the tort of negligence. Other names for it include workman’s compensation insurance and workmen compensation insurance.
How Does Workers Comp Work?
Typically, workers compensation insurance coverage includes medical expenses, disability benefits, compensation for lost wages, and even death benefits. It can also cover the cost of lawsuits, though workers comp also usually comes with employer’s liability insurance.
In general, employees who accept workers comp benefits can’t sue their employer. However, it is best to consult with a workers comp lawyer for more information, as cases can vary.
Workers comp is important not only for business but also for homeowners associations. It is not uncommon for HOAs to employ workers. Workers comp insurance can offer financial protection to an association should a work-related injury happen. But, even without traditional workers (i.e. associations with only an HOA board), workers comp can come in handy.
The Importance of Worker Compensation Insurance for HOA Communities
In most states, businesses are required to purchase workers comp insurance. California, for instance, stipulates that all employers must have workers’ compensation for all employees, even if a business only has one. While homeowners associations function in much the same way as a business, the law on workers comp usually does not apply to them. Still, HOA boards would do well to purchase this form of protection for two reasons.
First of all, homeowners associations have financial interests to protect. If an HOA community has paid employees, workers comp can save the association a lot of money should an incident occur. While standard insurance policies normally apply to paid employees only, there are some providers that also offer coverage for unpaid employees (i.e. volunteers). And, as you may or may not know, volunteers make up most of an association’s staff, such as board and committee members.
The second reason is that homeowners associations don’t function alone. These HOAs hire a variety of vendors to perform different jobs, such as landscaping, cleaning, and maintenance. In turn, these vendors employ workers who can suffer injuries while working within the premises of the association. Although these workers are technically employees of the vendor, there is nothing stopping them from hiring a workers comp attorney and suing the HOA as well. More often than not, this kind of situation crops up when the vendor (i.e. their actual employer) does not have proper coverage.
Coverage Considerations
For homeowners associations, it is best to purchase an “If Any” workers comp policy that also has Voluntary Compensation (VC) Endorsement. This policy extends the protection to employees who suffer work-related bodily injuries. Standard workers comp policies typically only provide General Liability, which may not include bodily injury to an employee.
The National WC Program specifically caters to homeowners and condo associations. In North Carolina, for example, this program has paid $11,677 in damages after a manager developed a hernia while pushing a dumpster. The annual premium costs around $570 for the “If Any” coverage.
In terms of minimum coverage limits, North Carolina does not have one. Most states, though, require a minimum coverage limit of $100,000 for bodily injury and $500,000 for bodily injuries by disease. But, because HOAs usually work with a lot of vendors, the risk of work-related injury is higher. As such, it is a good idea to take out a policy with a higher limit.
Why Vendors Should Have Proper Workers Comp Insurance
No homeowners association can function without help. Most hire vendors and contractors to carry out specific jobs. This can range from general cleaning and pressure washing to maintenance and repairs. But, as with a lot of things, hiring vendors comes with a risk.
When a vendor is not properly insured with workers comp, the HOA could find itself in hot water. In this scenario, if a vendor’s employee suffers injuries while on the job, most states transfer the responsibility to the association. In other words, the law will consider the injured employee as one of the homeowners association’s workers. And, when that happens, the injured employee can then bring a lawsuit to the association and seek damages.
Workers comp insurance becomes helpful in this situation because it can cover the injured worker’s expenses. As a result, the association will not need to reach into its own funds to pay for the injured’s medical bills, loss of income, and disability benefits.
How to Properly Screen Vendors
To protect themselves from potential liability, homeowners associations must always require that vendors have workers comp insurance. Any vendor that does not have it should not be allowed to pass the screening. But then, it is easy for vendors to lie and say they have sufficient workers comp coverage. As such, association boards should ask for proof in the form of a Certificate of Insurance.
Simply asking for this certificate once, though, usually at the start of the agreement, is not enough. Whether an association has a multi-year contract with a vendor or has a contract that renews on an annual basis, boards should still ask for the certificate at least once every year. Insurance policies can expire, and some vendors will allow theirs to lapse without informing their clients. So, when their worker gets injured in the second year, a lapsed policy will not cover the damages, thereby jeopardizing the HOA instead.
Finally, it is paramount that HOA boards screen any subcontractors, too. Vendors will sometimes outsource other parts of their job to a subcontractor. And these subcontractors must also have proper coverage and be subjected to the same screening procedures.
Even with all these screening protocols in place, HOAs should still maintain their own workers comp insurance. After all, it is much better to have all bases covered than to fall into financial ruin.
HOA Management Company’s Workers Comp Insurance: Does It Cover HOAs?
For homeowners associations that employ an HOA management company, workers comp is still vital. Just because the HOA management company does most of the work and is the one responsible for hiring vendors does not mean the HOA is covered by the company’s policy.
As a matter of fact, the management company’s workers comp insurance does not extend to the association or the association’s employees. As such, in the event of an injured worker, the HOA will have to answer for it.
Just as Much of a Priority
Homeowners associations need all kinds of insurance policies, and workers comp insurance is probably the last thing on their minds. But, considering how an injury in the workplace can cripple the association financially in one fell swoop, boards should hold workers comp in the same regard as other policies. When shopping for workers comp, make sure to take all options into account and decide on what is best for the community.
It is not always easy to stay on top of your association’s insurance needs. If you need help with insurance or any other task, partner with Clark Simson Miller. Call us today at 865.315.7505 or contact us online to request a free proposal.
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