Most conventional businesses are well aware of the risks that injured or ill employees present, and have adequately protected themselves with workers’ compensation insurance. However, for organizations with a slightly less conventional structure, the insurance coverage grows a bit more complicated.
Homeowners associations do not function like your typical business or organization; they are nonprofit bodies consisting of volunteers, and they often find themselves working with contractors, subcontractors, outside vendors, and management companies. Since many of their workers do not fall under the umbrella of the typical full-time or part-time employee, some leaders are under the impression that workers’ compensation coverage is not necessary. However, if someone is working on behalf of the association, they are legally able to sue the association that hired them for damages, making workers’ compensation insurance a must.
Yes, It’s Necessary
By California Law (specifically California Labor Code, Section 3600 (a)), all employers are required to maintain workers’ compensation insurance coverage, and nearly every set of CC&Rs requires that a Board of common interest development purchase workers’ compensation insurance coverage “to the extent necessary to comply with applicable law.”
Another common misconception is that these liabilities would be covered under a different insurance policy, such as the management company’s coverage, a general liability policy, or the association’s directors and officers (D&O) policy. However:
- The management company’s insurance coverage only covers their legal entity, not the HOA board that brought them on,
- A general liability policy, specifically one for community associations, is likely to include an exclusion of coverage “under a Workers’ Compensation law”,
- D&O insurance policies specifically exclude claims involving bodily injury or illness, regardless of how they were incurred.
The Benefits of Workers’ Compensation Insurance
It may not seem so, but workers’ compensation insurance can provide an incentive for more volunteers to get involved with an HOA. No one wants to be injured, but hearing that the association will protect them, compensate them, and help them recover from any potential injuries incurred will make volunteering for the association more appealing. This will also improve the overall morale in the association, as residents, volunteers, and third parties alike will feel safe and as though their health is a priority to the association.
About Scott Litman Insurance Agency
At Scott Litman Insurance Agency, we are dedicated to protecting HOA’s like yours. We have a unique understanding of the industry and the common risk exposures that you face in your daily operations. In fact, we find that 90% of the policies we review are missing coverages that violate the Covenants, Conditions and Restrictions (CC&R), exposing the board, HOA and management to lawsuits– which is why our comprehensive policies are tailored to meet your specific needs at competitive prices. For more information about our products, contact our experts today at (818) 879-5980 ext. 201, or fill out our online form.