HOA Mgmt not vetting contractors for Insurance

All HOA vendors need to carry their own insurance, including WC, to perform work in the HOA. MC should require an insurance ACORD from each vendor. Along with an IRS W-9 for financial reporting purposes.

If an uninsured vendor is injured, or worse, dies, any claim filed under the HOA policy costs the HOA a claim and puts the HOA policy in jeopardy.

Never allow them to work under the HOA insurance policy.

Thank you, Kerry.
The Board approves all contracts, but they’ve been assuming the PM has vetted all contractors she’s presenting proposals from for the Board to decide upon. I discovered that she has NOT been vetting any of them and telling the Board it doesn’t really matter if they don’t have WC…the HOA does. She points out how good the contractor has been ll these year and saying things like “He’ll never make a claim.” It’s just crazy. The rest of the Board is completely silent, not sure who to believe, and she’s making me look like some sort of troublemaker.

We have a board meeting tonight, where I’m planning on talking more about this. Was looking for reassurance from y’all! Thank you!!

Well, now; the meeting tonight might raise a different issue. Is the topic of contracts or of getting your attorney's opinion on the agenda? If not, how will you "talk about it?" Boards in CA may only discuss what's on the agenda.

Here's a thought: visit davis-stirling.com -> Main Index -> Contracts and read what these CA HOA attorney advise. They are specialists and you can learn a lot, as a new director, from their web site.

Say, what size is your HOA? Kudos for being willing to serve your community!

This is kind of tricky. Remember the PM is NOT a member of the HOA. Which means they don't actually have to follow the HOA documents. I dare say some don't know a word of what they say. It's up to the HOA board to "play by the rules". Which some rules are put there for a reason. Being licensed/insured contractors is one of them. The liability of hiring contractors that are not, is a big risk your HOA may not be prepared for. They don't fall under the HOA's insurance.

Good luck in getting that through the heads of your fellow board and PM. It may not click like you want it to. May need to let them know a few real world realities. Which is your HOA prepared to pay for full replacement cost of items an uninsured contractor destroys? Will your HOA insurance cover it and at what cost?

I don't see where this is "tricky". PM's should be fully aware of HOA protections in general. This is one of the "general" one's, and it's a very important one. PM's must have general knowledge of CCR's, laws, and basically HOA life. Otherwise then just pay them to collect dues and pay vendors so that, inexperienced, elected, volunteers can stumble their way through all the hard stuff while opening their HOA to needless liability.

Many small companies carry only liability insurance. WC insurance is not always required depending on the state. In NC it's not required unless you have over 3 employees.

If a vendor is working on property for any HOA they need to carry not only liability insurance for property mishaps, but also WC to protect the HOA for their worker's injuries. A vendor's employee injured while changing a light bulb can cost the HOA WAY more than damages suffered to property.

Think of it this way. Vendor without WC insurance changing a light bulb on a ladder. Easy, peasy, right? Worker falls off ladder, shatters his leg, back, cracks his head open............. HOA is now not only paying for his immediate medical needs on their policy, but also WC prorates forward ALL the anticipated costs associated with the injury. The case continues to stay open and active against the HOA for as long as State WC determines it should. This means that any future issues that are medically determined a result of the initial WC injury can carry forward for many years. This causes the HOA higher WC rates and may even limit their ability to secure future WC insurance.

MC/PM should never be sending vendor's to HOA property for any reason without insurance ACORD's for liability and WC insurance on file naming the HOA additional insured and loss payee.

Our MC won't even pay the guy who delivers, does not spread, our yearly pine needles, without full insurance.

I don't own the small company I work for, I oversee the ACORD's provided by the vendor's we do business with who perform work on our premises. No insurance, we can't use you. The owner isn't always happy with me when he thinks he's found a great new vendor that we can't use because they can't provide insurance.

One thing I've learned being a BOD is to stop using the PM's "preferred" vendors because there's sometimes a spiff or something on the back end for the PM. The BOD should do their due diligence
to ensure the vendors you hire are licensed, insured and bonded. California should have a state contractos licensing board where you can easily verify the vendors coverage. I may be wrong, but I thing it is
state law that contractors when advertising must add their state licensing number in all advertising and bid proposals. You risk a lawsuit against the HOA if a contractor you hire gets hurt while preferring
the job on HOA property.

Thank you, PatJ1. Very helpful!!

What is an insurance Accord? I haven’t heard that term.

Our CC&R’s state: “The Board of Directors shall require from each contractor, with whom it engages, satisfactory evidence that adequate worker’s compensation and liability insurance is carried with respect to employees and activities of such contractor.” So looks like the responsibility falls 100% on the Board?

I have not seen the language of the contract between the PM and the HOA, though.
I’m wondering if the PM is considered an ‘agent’ of the HOA and they’re recommending contractors to the Board upon which the Board relies, do they have a legal responsibility to the HOA to have vetted that contractor for current license/insurance status.

An insurance ACORD is an insurance industry standard form issued by the insurance agent that lists the insurance company retained along with the policy period, policy coverage, and policy limitations. They are personalized to list the HOA as additional insured/loss payee as circumstances warrant. The insurance agent sends a new one out at the end of every policy expiration for the next year. They will also notify you if the insurance lapses.

Our MC will not pay an invoice without one of file. I'm not sure if it's specifically noted in our contract and I don't want to look it up, but it's a standard business practice. Business license requirements vary by profession, plumber's, electrician's, etc.

If your MC/PM is recommending the HOA use uninsured vendors, it's time to look for a new MC. Very bad advise on their part leaving the HOA open to possibility huge liability.

Ultimate, legal responsibility falls on the Board.

Thank you for quoting the CCR on this point. That your manager insists on violating this important covenant dismays. The manager is making more work for you all; not doing her/his job AFAIC; and putting the HOA at risk.

As for my former HOA paying a contractor more than planned, so the contractor could (and did in fact) purchase WC insurance: The HOA had a high regard for this particular contractor. The contractor had done a lot of work when someone said, "Hey, does he have WC?" No, it turned out. The Board persuaded him to go buy it, and we would pay him the amount to cover it. It worked out well. It does not always.

I hear you about contractors saying they have no employees and are sole proprietorships, but then appearing with a crew. I'd be suggesting the Board talk with the HOA attorney. The trades in particular are at risk of getting seriously hurt.