Worker's Compensation for Community Associations

WORKERS COMPENSATION 
But, We Don’t Have Any Employees

In addition to your association master policy, we have included a Workers Compensation and Employers Liability quotation. This insurance would cover Colorado mandated medical and income benefits for employees who become injured or sick as a consequence of their employment. The estimated annual premium for this one year policy is $300 to $500. This is a minimum premium and is based on your having no employees as of the policy commencement date. Unless you have employees during the policy period, it will be your final, total premium.

Even though you have no employees, currently, and do not anticipate hiring any, you still need this important coverage. Here are the two principal reasons for that and the answers to frequently asked questions.

Reason #1: Employees of Independent Contractors Reason #2: Part time, Casual , Seasonal and Unanticipated Employees
Isn’t the contractor responsible for its own employees? Normally, independent contractors with employees are required, by State law, to maintain Workers Compensation insured. However, when a contractor fails to maintain the required insurance, a sick or injured employee may—and often does—recover direct from the association…even though he or she is not an association employee. Are all employees covered by Workers Compensation?  The State of Colorado Workers Compensation statue determines the scope and application of its benefits. This is usually based on some combination of number of employees, number of hours an employee works each week and types or categories of employment. Each State’s statute is unique and only an examination of your statute can provide this information
Doesn’t a certificate of insurance protect us? Obtaining a certificate of insurance from each contractor, indicating the existence of Workers Compensation insurance is a sound measure. However, all it means is that the required coverage is in force on a particular date. It provides no guarantee that coverage will remain in force. Is it possible to have an employee and not know it? A person performing services for you may or may not be an employee for Workers Compensation purposes. What appears to be an independent contractor relationship—and which may indeed be one for all other purposes—could be an employment relationship where Workers Compensation is   concerned. Aside from any other considerations, courts and Workers Compensation commissions lean toward an employment relationship whenever the person in question is otherwise uninsured.
If coverage lapses, doesn’t the contractors insurer notify us? Most certificates of insurance impose a “best efforts” or “reasonable efforts” standard on the insured regarding the notification of certificate holders. This does not guarantee timely notification. Who can tell us when we need Workers Compensation? Your insurance or legal advisor can help you with your Workers Compensation requirements.
Isn’t a hold harmless agreement from the contractor effective? Obtaining a properly drafted, enforceable hold-harmless agreement from each contractor can be an effective measure and one we recommend. Under this type of agreement, the contractor guarantees to insulate your association from liability for the injuries and illnesses of its employees. However, an agreement is only as good as the contractor’s solvency. If the contractor is not financially up to its legal obligations, its agreements are worthless.
Can a contractor drop its insurance and rely on ours? Anyone who is legally required to maintain Workers Compensation insurance, and fails to do so, is subject to the fines and other penalties prescribed by the State statutes. These penalties are intended to be far more burdensome than simple compliance. A prudent and financially sound contractor is unlikely to risk noncompliance. However, financial distress and simple oversite are frequent causes of noncompliance. Even many contractors who are insured attempt to treat some of their employees as independent contractors. This common practice, intended to save on Workers Compensation costs, is virtually impossible for you to detect. The only certainty of full compliance with Workers Compensation requirements and the protection of your community’s financial resources is this inexpensive coverage. Without it, some degree of unnecessary risk persists. With it, you avoid a potentially severe loss, a possible assessment needed to pay it and the punitive aspects of noncompliance.

This article was prepared by: Steve DeRaddo, Managing Agent Peliton Agency Mountain Office
www.peliton.net | sderaddo@peliton.net | (970) 945-5593
CIRMS-Community Insurance & Risk Management Specialist

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