Associations should carry workers' compensation insurance even if they have no employees. If the board hires a painter, landscaper, roofer, plumber, part-time handyman, etc., the association could be liable for employment-related injuries even though the vendors are independent contractors.
Unlicensed & Uninsured Vendors. By law, if a board hires an unlicensed contractor, the association automatically becomes the employer of the injured worker. (State Compensation Ins. Fund v. Workers' Comp. Appeals Board (1985) 40 Cal.3d 5.) This is true even if the contractor misrepresented the fact that he was licensed and insured. Without workers' compensation insurance, there are no limits on the damages that may be claimed by an injured employee, including claims for pain and suffering. The association could be liable and the membership could face large special assessments to pay the damages. With insurance, the employee's claims are limited and the loss is paid by insurance.
In Heiman v. Workers Comp Appeals Board (2007), the Montana Villas Homeowners Association hired Pegasus Properties as its management company. Pegasus hired Hruby, a contractor, to install rain gutters for the association. Hruby's employee was careless and a rain gutter touched a high voltage electrical wire, severely injuring the employee. Since Hruby was unlicensed and uninsured, the court concluded that both the association and its management company were the employers of the injured worker and both were liable to pay him workers compensation benefits.
Licensed but Uninsured Vendors. Typically, so long as the vendor is licensed, the injured worker will remain the employee of the vendor, and not the association. Accordingly, the injured worker would have the option of proceeding against the vendor either civilly or for workers' compensation. In the event that there was a finding of dual employment, then the association becomes liable. So long as the association is insured for workers' compensation, the injured worker's remedy would be limited to workers' compensation. If the association is not insured, then the injured worker can pursue the association both civilly and under workers' compensation.
Protection Against Loss. To avoid unexpected special assessments, boards should (i) purchase workers' compensation insurance, even if the association does not have employees and (ii) make sure their vendors are licensed and insured (always require a certificate of insurance prior to the vendor coming onto the premises).
HOA Volunteers: Worker's compensation policies generally do not protect an association when volunteers are injured while acting on behalf of the association.
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