Tuesday, May 28, 2013

Worker's Compensation Coverage - A Follow Up

Back on April 2, 2013, we posted information about the importance of an Association maintaining Workers Comp coverage - even if it did not have employees or permit volunteer activity.  We have had several questions (which we love!) on this topic, so this post is a follow up!  

To clarify, there are two primary types of Workers Comp that a Board can purchase for the Association:

Volunteers and Committee Members
As the name implies, this type of insurance would cover all people acting on behalf of the Association who are not compensated by the Association.  If the Social Chair is injured while hanging Holiday Decorations or a Board member falls while changing a light bulb - they would be covered under this type of Works Comp policy. Liability limits are generally $1 million but can be underwritten for higher.  Premiums typically start in the $750 - $850 range.

Payroll Driven
These policies are underwritten for people who are working on behalf of the Association, are compensated and are not covered under their own policy.  To underwrite, the insurance company will need to have an estimated twelve (12) month payroll for the vendor.  They will also require a description of the duties of the contractor(s).  The premium would then be based on both the payroll and job duties.  The contractor(s) would be placed into a worker’s comp rating code that most closely matches the provided job description.  The riskier the duties, the higher the rating and resulting premium.  At the end of the policy period, the insurer will require accounting proof from the Association of the actual payroll dollars paid to the contractor(s).  If the actual is higher than the estimate, additional premiums will be due.  Conversely, if the contractor was paid less than the estimate, a premium credit would be given by the carrier.  Multiple contractors can be covered under the same policy if their duties are similar.

The Board should work closely with their agent to identify the type of coverage best suited to fit their objective.  Make sure the payroll driven coverage does not over or understate the job duties of the contractor and accurately projects expected compensation levels.   

Although “Payroll Driven” Workers Comp is a higher priority, Access Management strongly encourages all Associations to obtain both types of coverage due to the potential risk.  While a current Board of Directors may prohibit any type of volunteer activity, unauthorized volunteerism and future Board decisions do expose the Association to liability.  Consult with your legal counsel and insurance broker about this urgent issue.

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