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. So, just how important is worker compensation insurance for HOA communities?
Worker Compensation Insurance for HOA Communities: What Does It Do?
What is workers compensation? Simply put, worker compensation insurance for HOA communities 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 HOAs 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 for HOA communities 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. They provide services such as cleaning, landscaping, and maintenance. If a vendor’s workers get injured on the job, they may hire an attorney to sue the HOA despite being an employee of the vendor.
In some cases, the vendors’ employees can be recognized as the HOA’s employees, too. If a 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. Worker compensation insurance for HOA communities is a great way to protect the association’s financial interests while working with contractors.
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.
4. Financial Protection
With sufficient coverage, worker compensation insurance for HOA communities can protect the HOA from financial risk. After all, workplace illnesses and injuries are inevitable. Homeowners associations will always need to perform even the smallest of maintenance activities. These expose the HOA to vulnerabilities.
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.
In addition, homeowners associations must ensure to obtain worker compensation insurance for HOA communities that includes all kinds of volunteers and employees. It should include unpaid workers, independent contractors, and seasonal workers.
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. However, 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 Much Is Workers Comp Insurance?
It depends on factors such as the HOA’s size, type of work, number of volunteers and employees, and history of workplace illnesses and injuries. More employees and HOAs that conduct riskier jobs will likely need to pay higher premiums. Nonetheless, the workers comp insurance cost is generally reasonable, so HOAs should not use it as a reason to forgo the policy. The cost is small compared to the financial losses an HOA might face from lawsuits.
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.
Does the Management Company’s Worker Compensation Insurance Cover the HOA?
HOA management companies are typically responsible for hiring and working with vendors. However, this does not mean their workers compensation insurance extends to the association or its employees.
If a worker is injured while doing their job, the HOA will likely take responsibility for the injury. As such, homeowners associations should make sure to have their own workers’ comp insurance policy.
Proper Screening: 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. This is because most states pass the responsibility to homeowners associations.
If the HOA also does not have proper coverage, it can cause serious financial distress. The injured employee may file a lawsuit against the association to seek damages. The HOA may need to dip into its own funds to pay for medical bills, disability benefits, and loss of income.
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 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 a separate policy for worker compensation insurance for HOA communities.
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.
Regardless, homeowners associations should consider the insurance provider’s reputation and overall financial strength. HOAs should also review the agency’s policy options, customer service, premiums, and claims processing experience. When in doubt, ask for referrals and look for reviews from other HOAs.
In addition, it’s always a good idea to find at least three potential insurance carriers and compare their policies to get the best deal. Try to find the most comprehensive policy at the most affordable price.
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 for HOA communities, the staff and association 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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