HOAs Need Workers Compensation Insurance to Protect Against Potential Liability to Injured Workers

It is not uncommon for associations to hire unlicensed and uninsured contractors to perform contracting activities, including but not limited to landscaping and gardening. If a contractor is uninsured when the services are performed, the association becomes the de facto employer of the contractor and his employees and thus becomes responsible in the event of an injury. To protect against this exposure, an association should have policies in place to make sure that all contractors are licensed and insured during the entire period of their work on the association’s property, and carry a workers’ compensation insurance policy like all other employers. An HOA should never hire any contractor who is not properly licensed and who does not carry liability and workers compensation insurance. Using unlicensed and uninsured contractors is a recipe for disaster.

Workers compensation insurance is governed by state laws that require certain employers to carry insurance to protect workers that are injured on the job. This mandatory coverage for employees precludes an injured worker from suing his or her employer for damages based on claims of negligence. Instead, the workers compensation insurance provides injured
employees with wage protection, medical, and other benefits. Although state laws frequently provide certain exemptions that enable some small employers and independent contractors to conduct business without workers compensation insurance, those exemptions do not provide adequate protection for a homeowners association that hires a vendor or independent contractor who utilizes an employee that gets injured on the job. That worker may still sue the association and the association will be exposed to considerable liability.

The only way to protect against this exposure is to enforce a policy that mandates the hiring of vendors and independent contractors who have appropriate licenses, as well as liability (at least $1,000,000.00 of coverage), and workers compensation insurance coverage. Furthermore, the association should verify the current license status of the contractor, along with the existence of the liability and workers compensation insurance for the period of the contemplated work on the association’s property.

A sample of a form that should be used when obtaining bids from independent contractors that covers the information that should be obtained and verified is available in the Store.

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