Managing Micromanagement

Information for our
member associations

Association and Management Company Found Liable in Association Worker’s Compensation Case

By Garth Leone,
Managing Member, CAIS, LLC

A recent California Court of Appeals case, Heiman v. Workers’ Compensation Appeal Board, has shed new light on the potential liability Associations and their managers face when contracting for on-site service and repair. Specifically, it highlights the importance of every Association, obtaining a workers’ compensation policy.

The Case

For those of you unfamiliar with the case detail, the “cliff notes” version is this – Pegasus Management (Heiman), the manager for The Montana Villas Homeowners Association, hired the Hruby Company on behalf of the Association to install rain gutters on the Association’s common area. An employee of Hruby was electrocuted and seriously injured on the job. Hruby was uninsured (and unlicensed), so the injured worker pursued the Association AND its management company for workers’ compensation benefits. The absence of a policy to provide benefits for the injured worker left the Workers’ Compensation Appeals Board assigning payment obligation equally to the contractor (Hruby), the Association (Montana Villas), and the management company (Heiman/Pegasus Management).

The Recommendations

The obvious first recommendation is to hire only licensed and properly insured contractors. While professional managers are generally very good about that, it is important for Association Board Members to draw a line in the sand when it comes to this issue. Do not allow any type of contract for on-site services without verification of proper licensing and appropriate insurance for Workers’ Compensation and for the work performed. The case also highlights the importance of the Association having a “backstop” if the Workers’ Comp policy carried by the contractor fails. The only way to be absolutely certain that your association will not bear the risk of a contractor’s insurance failure is to obtain your own workers’ compensation policy.

 

 

 

Additional Exposure

In addition to the exposure addressed in this case, the Association is at risk of owing workers’ comp benefits to volunteers who perform “work” on behalf of the Association. Imagine these scenarios: An association member volunteering at a “Saturday Community Clean-up Day” is injured, or a Board Member slips and falls during a site inspection. While the General Liability (GL) policy provides “bodily injury” coverage, bodily injury to an “employee” is specifically excluded so the exposure can be pushed to a workers’ compensation policy. A volunteer performing work on behalf of the Association could easily be construed as an “employee” by the GL carrier, especially if the injuries are significant. If the Association carries the right type of workers’ compensation policy, this exposure can be covered too.

Summary

The case demonstrates that simply being diligent about insurance and licensing verification for contractors that provide on-side service for your association is no longer enough. While those are by far the most important first steps to protect your Association, you must insist that your Association has the backstop of its own Workers’ Comp policy for “if any” and volunteer coverage.