California HOAs Need Workers Compensation Insurance to Protect Association from Claims


Appeals Court Ruling Leaves HOAs vulnerable to Workers Comp Claims

If you and your association are under the false impression that you don’t need work comp insurance because you don’t have anyone on payroll, think again because you could be in for a nasty surprise. Just ask the Montana Villa Homeowners Association who are now facing a back-breaking settlement which could easily reach a sum into the millions.

On April 11th, 2007 the Court of Appeals issued a far-reaching decision in the Heiman vs. Workers Compensation Appeals Board case which could establish future precedent for HOA associations. The ruling means your association could possibly be held liable to pay workers compensation benefits to an injured worker employed by an uninsured and unlicensed contractor. electrician_charred_lg_wht

How did this happen? The association, after reviewing three bids to install rain gutters, decided to go with the lowest  bid ($1050 for a 2 day job)  and hire Rubes Rain Gutter Service (who happened to be uninsured and unlicensed) . Rubes then hired, Freddy Aguilera, a day laborer to perform some of the work for $65 a day. On the first day of the job, Mr. Aguilera touched a high voltage power line with the metal rain gutter and was  severely injured,  leaving him  90% permanently partially disabled.   (In basic English this means you owe the injured employee 90% of his future earning potential plus 100% of all injury related medical bills) The Work Comp Appeals board originally found that only the property manager was jointly liable with the contractor for the paying the injured workers. The property manager’s work comp carrier, State Fund, appealed the decision. The court of appeals reversed the decision and found that the association was also jointly liable for paying the injuries.

Is your association at risk?
1)    Do your property manager and association require all contractors to provide proof of license and insurance when bidding for jobs?
2)    Are you and your property manager hiring only licensed and insured contractors for all jobs (no matter how small?)
3)    Can you be absolutely sure that your pre-approved contractor has not allowed a lapse in license or insurance coverage at any time during and up to the completion of the work?

If any answer is ‘no” you may not have the systems needed to fully protect your association!

Practical implications:
It is not uncommon for associations to hire unlicensed and uninsured contractors to perform activities such as landscaping and gardening. If a vendor is uninsured at the time he is performing services at your premises you become the de facto employer for that vendor and his employees.  If he or any of his employees get injured while working at your association you are now responsible for paying for those injuries.   There are only two ways to eliminate this exposure:   1. Make sure that your vendors are licensed and insured as of the day they walk on to your premises. 2. Purchase workers compensation insurance, like every other employer in the state.  If you choose not to buy coverage, and you do not aggressively check for insurance, you are accepting a possible expense that can be hundreds of thousands dollars, when a vendor’s employee gets hurt at your association.

CLICK HERE for HOA Work Comp Insurance Claims Prevention Checklist