Does an HOA Without Employees Really Need Workers' Compensation Insurance?
Gary Deck Community Association Insurance Solutions, LLC
The topic of workers' compensation insurance in an HOA is consistently part of conversations with board members and community managers. Most commonly, that conversation starts with a question, "Why are we paying for workers' compensation insurance when we don't have employees?" While that is a reasonable question, there is a reason behind the purchase.
The landmark case that created the best practice recommendation of workers' compensation insurance for any HOA is from 2007. In Heiman v. Workers' Compensation Appeals Board (149
Cal.App.4th 724), an unlicensed and uninsured contractor was hired to install rain gutters on a condominium building. An employee of the contractor was injured on the job, and the Workers' Compensation Appeals Board determined the hiring party was jointly and severally liable for workers' compensation.
Of course, only licensed and insured contractors should be retained for services to an HOA. But strange things happen, and details get missed. So the recommendation to purchase workers' compensation insurance was born out of a need to protect against the rare occasion where an HOA may be deemed the employer of a contractor's employee.
And, with the Heiman case, there is a twist. The management company was actually the hiring party, not the HOA. So, the management company was ultimately deemed the employer.
To protect the management company and the HOA against unwanted workers' compensation claims, the HOA should purchase a zero ($0) payroll (a.k.a. "if any") workers' compensation policy. A workers' compensation policy provides a backup should a contractor's policy fail.
Coverage for Volunteers
In addition to the "if any" exposure addressed in Heiman, the HOA and the management company are at risk of owing workers' compensation benefits to injured volunteers who perform work on behalf of the HOA. Imagine these scenarios: an HOA member volunteering at a "Saturday Community Clean- up Day" is injured, or a board member slips and falls during a site inspection. Although 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'
28 July | August 2022
compensation policy. A volunteer performing work on behalf of the HOA could easily be construed as an employee by the general liability carrier, especially if the injuries are significant. To cover volunteers, board members, and committee members, the HOA should purchase a workers' compensation policy.
Most carriers providing workers' compensation insurance to HOAs will include coverage for board members and committee members, but does the policy cover volunteers? Well, considering nobody is compensated for board or committee participation (or shouldn't be), everyone is a volunteer. What the carrier wants to know is who is supposed to be "working" with the HOA. To define that, it is recommended that volunteers be named to a committee created by the board and the names of participants recorded in the minutes of a board meeting. Otherwise, it's possible that a random volunteer may be excluded in the event of an injury.
Refusal to Buy Coverage
Some boards simply will not accept the recommendation to purchase workers' compensation insurance. There is nothing wrong with this perspective. The board is charged with making decisions it feels are in the best interest of the HOA. Management, as an agent of the HOA, should work with an insurance professional to present the details of the Heiman case and the availability of coverage to protect the exposure. If the board opts not to purchase coverage, managers and management firms might consider a procedure to have a board member sign a "refusal/rejection of coverage" letter. If signed, a copy should be provided to the HOA's broker/agent to keep on file in case a workers' compensation claim arises.
Even though all HOAs should only hire licensed and insured contractors, we know this does not always happen. By hiring uninsured vendors or contractors, the management company and the HOA can be held liable for workers' compensation claims submitted by their vendors. Following clear procedures, ensuring that only the HOA contracts with service providers, and purchasing a minimum premium workers' compensation policy can provide peace of mind.
-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 HOA Workers' Compensation program. For additional information regarding this article, he can reached at 916.212.8310 or at
gary@mgalive.com
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