Association coverage requirements and employee types
According to Florida law, the community association might find that they could be financially liable to injuries of others, even though they don’t have any direct employees. There are three primary exposures for community associations for injuries to those performing work on behalf of the association. They are:
- Direct Employees
- Uninsured Subcontractors Employees
- Volunteer Workers insured like Employees
Coverage Based on Employee Type
An organization is required to purchase coverage if there are four or more employees (non-construction industry guidelines). Even with three or fewer employees, the organization is still legally liable for compensation to injured employees. To properly protect the members of the community against lawsuits for injuries, you should purchase a workers’ compensation policy.
We strongly recommend any job awarded by the organization require proof of insurance from the subcontractor. This should include liability insurance and workers’ compensation insurance. The organization should secure an ACORD 25 Certificate of Liability Insurance showing proof of both coverages and keep it on file.
Unfortunately, if the subcontractor’s policy should lapse, there is no requirement for the insurer to notify certificate holders of the lapse in coverage. The applicable words in the Acord Form 25 are “will endeavor to mail” notice. It’s not guaranteed that the notice will be sent. The newer forms don’t even have this language.
If the subcontractor has no workers’ compensation insurance to protect the subcontractor’s employees, the duty falls to whoever hired the subcontractor – the association! The association would have to provide medical coverage and loss of wages for the injured employee until full recovery. The association could be forced to special assess all of the members of the community to cover this extraordinary expense. This isn’t a very popular option and the board of directors might get sued for not acting in the best interests of the association.
The best way that community associations can protect its membership is to require Certificates of Liability for liability and workers’ compensation for all subcontractors.
Some of our insurers will provide coverage for volunteer workers. Volunteers should be working with board approval. Additionally, they should only perform low hazard tasks such as light building maintenance, office work and gardening. Higher hazard tasks that should not be performed by volunteers include work that requires getting on tall ladders, using certain power tools, climbing on roofs, trimming trees, etc. You should always use a contractor for these more hazardous duties. As stated before, Certificates of Insurance should be secured before the work starts.
Management Company Relationship
The community management company is the agent for the association. It operates at the direction of the board of directors of the association, which means the community association is responsible for the management company’s actions. Employees working under the management company’s workers’ compensation policy fall under the co-employer doctrine. The management company’s workers’ compensation policy is required to protect the employees if they are injured on the job by agreement between the parties. The policy does not extend coverage to the association’s subcontractors (or any uninsured subcontractors). Furthermore, it will not cover association volunteers. This gap in coverage can only be addressed by the association purchasing their own workers’ compensation policy.
One note of caution: It is a condition of the workers’ compensation policy that the association does not knowingly hire an uninsured subcontractor. If they do, it could void the insurance contract and the association will have to pay damages out of pocket for injured employees of subcontractors.
If unit owners contract with subcontractors for their own unit repair work, the association is generally not involved in these activities. The agreement is between those parties and NOT the association. For some repair work, association approval for the work may be required if it involves common element property, including structural alterations, but the contract for service is still the responsibility of the unit owner who signed the contract and paid the contracted price. The unit owner should also request proof of liability and workers’ compensation as the association must do.Otherwise the condominium unit owner homeowner’s policy (HO-6) only provides limited coverage under the medical expense section of the policy. This could be anywhere from $1,000 to $10,000 in coverage limits, but that is all.
For more information on sinkhole and catastrophic ground coverage, or Community Assocation Management other insurance questions, contact:
Matt Mercier, AAI, CIRMS, CMCA, LCAM
Director of Community Association Management