Associations should carry Workers’ Compensation insurance even when they have no employees. If the board hires a landscaper, plumber, handyman, or other worker, the association may be liable for employment related injuries even though the person hired is an independent contractor.

By law, if a board hires an unlicensed contractor, the association automatically becomes the employer of the injured worker. This is true even if the contractor misrepresented the fact that he or she was licensed and insured. Without Workers’ Compensation insurance, there are no limits on the damages that can be claimed by an injured employee, including claims for pain and suffering. Associations can be held liable and the membership could face large special assessments to pay any damages. With proper insurance, the employee’s claims are limited and the loss is paid by the insurance company.

In Heiman v. Workers Comp Appeals Board (2007), the Montana Villas Homeowners Association in Los Angeles hired Pegasus Properties as its management company. Pegasus then hired a contractor, to install rain gutters for the association. The employee was careless and a rain gutter touched a high voltage electrical wire, severely injuring him. Since the contractor was unlicensed and uninsured, the court concluded that both the association and its management company were the employers of the injured worker and both were held liable to pay him Workers Compensation benefits for life.

Generally, as long as a contractor is licensed, the injured worker will remain the employee of the contractor and not the association. In the event there is a finding of dual employment, the association becomes liable. As long as the association is insured for Workers’ Compensation, the injured worker’s remedy is limited to Workers’ Compensation. If the association is not insured, the injured worker can pursue the association both civilly and under Workers’ Compensation.

To avoid liability and large special assessments, boards should purchase Workers’ Compensation insurance, even if the association does not have employees and make certain their contractors are licensed and insured. Always require a certificate of insurance prior to the contractor coming onto the property.