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Not Our Problem…Or Is It? Why Community Associations Without Direct Employees Should Still Consider Carrying Workers’ Compensation Insurance

06/01/2023 10:55 AM | Anonymous member (Administrator)

By Tressa Bishop, USI Insurance Services

Picture this: The association’s manager hires a contractor to trim trees and bushes on the community’s property. They require the contractor to provide a current Certificate of Insurance (COI) showing General Liability coverage and Workers’ Compensation coverage. The dates on the COI show that the policy will cover the dates that the work is scheduled to be completed. During the project, a worker is injured and goes to urgent care for treatment. The claim is reported to the contractor’s Workers’ Compensation carrier, however, it is denied as the policy was canceled the prior month due to nonpayment of premium. 

Community associations frequently use independent contractors to perform various services. It is difficult, if not impossible, for an association to verify with absolute certainty that all of the independent contractors they use have an in-force Workers’ Compensation policy at the time work is being performed onsite. Even a signed statement by the independent contractor verifying their independent contractor status may not be enough to keep an association out of a claim. 

Under certain circumstances Colorado statutes allow individuals who are injured while in the service of another to make a claim against that person or organization for Workers’ Compensation benefits without regard to previous representations by such person that they are an independent contractor. Contrary to popular belief, it is not possible to sign a waiver eliminating a statutory requirement. If the injured party is successful in showing that they were an employee, as defined by Colorado’s Workers Compensation statute, and that their injury occurred during the course of serving an association, they, or their heirs, are entitled by law to Workers’ Compensation benefits.

The Commercial General Liability coverage carried by community associations does not apply to Workers’ Compensation claims. In fact, it specifically excludes coverage for such claims. The only way to fill this gap in coverage is for community associations to carry a Workers’ Compensation and Employer’s Liability policy.

Community associations carrying Workers’ Compensation policies with no direct employees are rated on zero payroll. The carrier is not intending to cover anyone under the policy but will respond to a claim if any exposure presents itself during the term (referred to as If/Any coverage). They will audit the policy during or after the term to pick up any incidental payroll for contractors who weren’t able to provide proof of coverage.

In addition to the If/Any coverage afforded to associations by a zero payroll Workers’ Compensation policy, there are some policies offered in the marketplace which include Volunteers in the definition of Employee. This could be very helpful for an association with an active volunteer pool. If a person volunteering for the association at the direction of the Board is injured, the volunteer may be covered under the policy. 

These relatively low-cost policies do have a few requirements that must be met in order for the volunteer coverage to be afforded:

  1. The volunteer duties must be approved by an official motion of the Board of Directors. We recommend a standing Board meeting agenda item for upcoming volunteer efforts within the community.
  2. The volunteer duties must not require specific licensing or training (for example, it could not be electrical or plumbing work that would otherwise require the individual to be licensed in the trade).
  3. There can be no payment whatsoever to the volunteer for their efforts. For example, no gift cards, cash payments, etc.

Below are a few examples of volunteer claims* covered by such policies that include Volunteers in the definition of Employee:

  • Person fell removing tree stakes, fractured hip and leg - $236,943
  • Tripped on tree root, fractured knee and shoulder - $123.970
  • Slipped and fell on ice, fractured shoulder - $30,662
  • Hand laceration - $5,500

Even communities that try to do everything possible to reduce the chance of loss can find themselves involved in a situation where they must “self-insure” or pay out of pocket for an accident that may have been covered by a low-cost insurance policy. It is highly recommended to speak to an insurance professional who specializes in community association coverage about the need for a Workers’ Compensation policy for your community. 


Tressa Bishop, MBA, CIC, CIRMS is an Executive Vice President with USI Insurance Services. Tressa has specialized in the community association insurance niche for over seven years and has helped hundreds of communities with strategic insurance placement, claims advocacy, and Board and member education. She holds the Community Insurance Risk Management Specialist (CIRMS) designation through CAI, the Certified Insurance Counselor (CIC) designation through The National Alliance for Insurance Education & Research, and has earned a BA from Colorado State University and an MBA (Finance) from Fairleigh Dickinson University. 

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