The Residential Condominium Association and Workers Compensation.
Is Your Association Protected?
Posted on January 6, 2017 by Bruce Q. White Jr, CEO at Whitehaven Insurance Services
We hear it all the time, “We don’t have any employees so we don’t need workers’ compensation insurance”. Nothing could be further from the truth because residential condominium associations can and have been held responsible for medical expenses and lost wages when uninsured contractors are injured while working on an association property.
An association board of directors (BOD) has a fiduciary responsibility to protect the association from uninsured contractors. The BOD should always make sure a contractor carries general liability and workers’ compensation insurance policies before allowing the contractor to do any work on the association property. General liability should have no less than a $1,000,000 per occurrence limit and workers’ compensation should be at required statutory limits. The BOD protects the association by securing an evidence/certificate of insurance from the contractor showing all the required coverages are in place prior to allowing the contractor to do any work at all.
Some things that can put your association at risk are as follow:
- Many associations like to hire contractors that own a unit within the association. Because the contractor is a friend, many times the BOD assumes the contractor has all the required coverages so they never ask for a certificate of insurance. These contractors can be very small with no employees so they don’t carry work comp and, in some cases, no insurance at all. If the contractor or any of his sub-contractors were to get hurt on the job, the association could be considered to be in an employer/employee relationship making the association liable for workers’ compensation benefits.
- Most contractors are honest and they carry insurance throughout the time they are contracted with an association. Workers’ compensation insurance is a major expense for these contractors. The problem is with contractors that present your BOD with a certificate of insurance to secure a job then cancel or non-renew the coverage to save money. This does happen and the insurance carrier has no obligation to notify your association when it does. This can create a huge liability to the association if the contractor or a sub-contractor is injured on the job. The fact is associations have no control of a contractors business decisions.
- An association property manager hires an unlicensed, uninsured contractor and an employee of the contractor is injured while working on the association property. It is possible that a court would rule that the association manager and the condominium association are jointly liable for workers’ compensation benefits.
These are just some scenarios that can occur and cause a tremendous financial loss to your association. The liability responsibility would most likely be determined by a Workers’ Compensation Appeals Board (WCAB) or a court. No one can say what the final decision a WCAB or court will be but both can be very liberal when determining what constitutes an employee/employer relationship. With all of the disastrous financial exposure to associations, the question is “why would any association take a chance when the risk can easily and inexpensively be eliminated?”
Condominium associations can simply carry a “minimum premium” or “if any” workers’ compensation policy. These policies normally cost less than $1,000 a year but the protection they provide is enormous. “Minimum premium“/“if any” workers’ compensation policies are subject to annual audits and premiums can well exceed the minimum quoted premium if the association hires uninsured contractors during the policy period. For this reason, it is imperative that the BOD secures an evidence/certificate of insurance prior to letting the contractor begin working.
We strongly recommend that all residential condominium associations carry Workers’ Compensation coverage even if they don’t have any employees. It’s a small price to pay for the security and peace of mind it provides.
Bruce Q. White Jr is the CEO at Whitehaven Insurance Services. Bruce and his commercial team have specialized in writing insurance for residential condominium associations on the Alabama and NW Florida gulf coasts since 1994. The Whitehaven commercial team welcomes questions about the workers’ compensation issue or any other insurance issue that may be of concern to residential condominium associations. They can be contacted at www.whitehaveninsurance.com or by calling (251) 967-3323.