Worker compensation insurance is a necessity in today’s liability-riddled landscape. While this form of insurance is more often associated with businesses that employ workers, it applies to homeowners associations, too.
Understanding Worker Compensation Insurance
What is workers compensation? Simply put, worker compensation insurance provides wage replacement and medical benefits to employees who suffer injuries or get sick due to a work-related cause. Receiving these benefits typically means that employees waive their right to sue their employer for the tort of negligence. This type of insurance is also known as workmen compensation insurance and workman’s compensation insurance.
In addition to wage replacement and medical benefits, workers compensation benefits normally include disability benefits and death benefits. It can also help reduce the liability that employers must shoulder if and when an employee injures themselves or falls ill while on the job.
Do Homeowners Associations Need Workers Compensation Insurance?
Some people mistakenly believe that homeowners associations can do away with workman’s comp. But, the opposite is actually true. Even if an HOA only has a functioning board and an HOA management company, worker compensation insurance is still essential for a number of reasons.
1. State-Required
Most states require businesses to have workers’ comp insurance, though the parameters that trigger such a requirement can vary. For instance, in North Carolina, businesses that employ three or more workers have to get worker compensation insurance. In California, on the other hand, workers’ comp is mandatory even if the business only employs one employee.
That being said, homeowners associations are not typically treated like businesses. In other words, HOAs are not technically required to have workers’ comp. Still, considering the benefits this type of insurance offers, HOAs would do well to purchase it.
2. Works With Vendors
It’s not just a matter of the law with workers’ comp. Homeowners associations work with vendors a lot. And, in some cases, the vendors’ employees can be recognized as the HOA’s employees, too. If a vendor’s worker gets injured on the job and the vendor does not have sufficient coverage, that worker can go after the HOA for benefits or damages.
3. Coverage for Both Employees and Volunteers
Homeowners associations sometimes employ workers of their own. In that case, workers’ comp is definitely vital. But, what about volunteers? Does workers’ comp cover them, too?
It depends on the policy. Although they are volunteers, they also have the ability to sue the HOA for work-related injuries. As such, HOAs should look for a worker compensation policy that offers coverage for volunteers as well. Examples of volunteers include board members and committee members.
Coverage Considerations for Worker Comp Insurance
Most worker compensation insurance policies provide coverage for General Liability. But, this form of coverage usually does not cover bodily injury to an employee. Therefore, if the industrial commission rules that a contractor’s employee is, indeed, an HOA employee, the HOA may not have coverage readily available. To protect the association’s assets, it is recommended to take out an “If Any” workers’ comp policy with a Voluntary Compensation (VC) Endorsement.
The National WC Program specifically caters to condo and homeowners associations. In the past, it has paid $11,677 for a manager who developed a hernia while pushing a dumpster in a North Carolina HOA. The annual premium for an “If Any” policy with VC Endorsement is $570.
As for minimum coverage amounts, North Carolina does not currently have a state-mandated one. Though, many states legally require employers to have a limit of at least $100,000 for bodily injury and $500,000 for bodily injuries by disease.
How to Avoid Liability When Hiring Vendors and Contractors
Homeowners associations often hire third-party vendors and contractors to perform various tasks around the community. But, there is always a risk when it comes to employing such entities. If a vendor or contractor does not have proper worker compensation insurance, the HOA may become liable for any work-related injuries their employees suffer. If the HOA also does not have proper coverage, it can cause serious financial distress.
To avoid such liability, homeowners have to check the following:
1. Certificate of Insurance
First of all, homeowners associations should never hire a vendor or contractor that does not have sufficient workers’ comp insurance. Simply possessing a license is not enough. Unfortunately, some vendors may lie and say they have workers’ comp just to get the job. To ensure protection, HOAs should ask for a Certificate of Insurance as proof. If a vendor can’t or doesn’t want to produce such a certificate, consider it a red flag and look for a different vendor.
2. Annual Check-Ups
Sometimes, a vendor will present the HOA with a Certificate of Insurance during the hiring process but then will allow the policy to lapse once they get the job. When the policy lapses, it no longer has an effect, which means both the vendor and the HOA become vulnerable. Thus, it is important to make sure vendors maintain their policies by asking for the Certificate of Insurance on an annual basis.
3. Subcontractor Screening
In some cases, vendors will hire subcontractors to perform specific tasks. These subcontractors should also possess adequate workers’ comp. Homeowners associations should not allow vendors to hire subcontractors without approval from the HOA itself. Proper screening, which includes asking for a Certificate of Insurance, can save the HOA a lot of trouble down the road.
Of course, even after taking all of these steps, the HOA should still maintain its own worker compensation insurance policy.
Frequently Asked Questions on Worker Compensation Insurance
How Much Is Workers Comp Insurance?
The workers comp insurance cost is generally reasonable, so HOAs should not use it as a reason to forgo the policy. On average, the annual premium for workers’ comp costs $560. This amounts to about $47 a month. Keep in mind, though, that policy premiums can vary depending on the provider, the riders, and the coverage limit.
How to Get Workers Comp Insurance?
Most states allow homeowners associations to take out a workers’ comp policy through a private insurer. Nowadays, insurance can even be purchased online. If an HOA has an existing relationship with a provider or agent, it is best to ask them for a workers’ comp quote and avail of any discounts.
Does the Management Company’s Worker Compensation Insurance Cover the HOA?
While HOA management companies generally deal with vendors and employees, their workers’ comp usually does not cover the HOA or the board. As such, homeowners associations should make sure to have their own workers’ comp insurance policy.
All-Around Protection
Workers can suffer all sorts of injuries and illnesses while on the job. Even if they are under the employ of a vendor, these workers can still hold the HOA accountable. With worker compensation insurance, though, HOAs can receive proper protections.
An HOA management company’s insurance policy may not cover your HOA, but it can help evaluate your current insurance policies and provide valuable advice. For the best HOA management services, Cedar Management Group is the only way to go. Call us today at (877) 252-3327 or contact us online to learn more.
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