Condo Owner

Spring 2017

Condo Owner publishes information vital to the business and pleasure of resort condominium ownership. Topics covered relate to real estate market trends, community association matters, rental management issues, tax and insurance updates and more.

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insurance condo owner • S P R I N G 2 0 1 7 36 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 asso- ciation from uninsured contractors. The BOD should always make sure a contractor carries general liability and workers' compensation in- surance policies before allowing the contrac- tor to do any work on the association property. Gener- al liability should have no less than a $1,000,000 per occurrence limit and work- ers' compensation should be at required statutory limits. The BOD protects the associa- tion 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. Some situations that can put your associa- tion at risk are as follows: Many associations like to hire contractors that own a unit within the association. Be- cause 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 workers' 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 employ- er/employee rela- tionship making the association liable for workers' compensation benefits. Most contractors are honest and carry insurance throughout the time they are con- tracted with an association. However, workers' compensa- tion insurance is a major expense for contractors. A problem that can occur is with contractors that present your BOD with a cer- tificate 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 of the cancellation. This can create a huge liability to the association if the employee of a contractor or a sub-contractor is injured on the job. The fact is that associations have no control of a contractor's business decisions. If an association property manager hires an unlicensed, uninsured contractor and an employ- ee 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 as- sociation. The liability responsibility would most likely be determined by a Workers' Compensa- tion Appeals Board (WCAB) or a court. No one can say what the final decision of a WCAB or court will be but both can be very liberal when determining what constitutes an employee/em- ployer 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 sub- ject to annual audits, and if the association hires uninsured contractors during the policy period, premiums can well exceed the minimum quoted premium. For this reason it is imperative that the BOD secures an evidence/certificate of insurance prior to allowing the contractor to begin work. It is strongly recommended that all residen- tial 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. The Residential Condominium Association & Workers Compensation 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. Is Your Association Protected? By Bruce White We

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