HOA and COA insurance policies protect your owners’ association against various types of liability. One such type of HOA and COA insurance is known as employee benefits liability coverage.

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What Exactly Is Employee Liability Coverage?

Employee liability coverage covers legal expenses for organizations if an employee or contracted worker gets hurt or falls ill due to a work-related incident. It is often part of a larger workers’ compensation package, although it can also be acquired separately. 

That being said, it’s important not to confuse these two types of coverage — workers’ compensation insurance pays employees’ medical costs and covers wages, whereas employee liability coverage pays employers’ legal expenses.

Employee benefits liability coverage takes care of legal expenses that fall outside of the realm of normal liability coverage and workers’ compensation. These may include:

  • Third-party lawsuits
  • Loss of consortium lawsuits
  • Consequential bodily injury lawsuits
  • Dual-capacity lawsuits

When Would an HOA or a COA Need To Get Employee Liability Coverage?

You typically only need to get HOA insurance or COA insurance if your owners’ association is large enough to employ its own workers, but it’s also worth considering if you hire a lot of contractors for different services.

Although smaller HOAs and COAs don’t typically employ full- or part-time workers themselves, they do work with a lot of outside vendors to carry out tasks in common areas. 

For example, employee benefits liability coverage can be applied to injury and illness lawsuits from the following types of workers:

  • Maintenance people
  • Landscapers
  • Plumbers
  • Electricians
  • Roofers
  • Cleaners
  • Any other employees or contractors

Even though outside contractors should have their own workers’ compensation packages, there’s still a risk of getting held liable should anything happen to them on HOA or COA property, so it’s better to err on the side of caution.

Having the proper COA or HOA liability coverage protects your association from having to pay legal costs related to lawsuits if someone gets hurt and decides to sue.

This could happen if an employee or contractor decides that their workers’ compensation benefits are not enough and feels that the HOA or COA is at fault for an injury due to negligence, for example.

Employee Benefits Liability Coverage Limits 

Although an HOA or COA employee benefits coverage policy protects against many unforeseen liability issues, it’s not without its limitations.

For instance, this type of insurance doesn’t cover lawsuits arising from downsizing, workforce restructuring, or layoffs. These are covered by a different type of insurance known as employment practices liability insurance.

Employee benefits liability insurance also doesn’t cover cases where the employer knowingly aggravates an employee's condition, such as if they make an employee continue to work in unsafe conditions or with an existing injury or illness.

Additionally, these types of policies have limits on how much they pay out to cover legal expenses. These limits might be $100,000 per incident or per worker, or $500,000 total per policy, for example.

Fiduciary Liability vs Employee Benefits Liability 

Another type of liability insurance you may have heard of is fiduciary liability insurance, but don’t confuse this with employee benefits liability coverage. Of the two, only the latter is relevant for HOAs and COAs.

This is because fiduciary liability insurance is much more narrow in focus — it only applies to claims of breach of fiduciary duty, or matters related to money, covered by the Employee Retirement Income Security Act (ERISA), rather than work-related injury and illness lawsuits.

Tips for HOAs and COAs To Avoid Liability Issues

While it’s a good idea to have an HOA or COA employee benefits liability policy in place to cover all your bases, there are other ways you can protect your association against lawsuits from employees or contractors. These include:

  • Ensure all vendors you work with are licensed and insured themselves
  • Screen vendors and contractors (and check references) to make sure they’re reputable and telling the truth
  • Ask outside employees to show proof of insurance annually (to avoid lapses)
  • Make sure vendors tell you about any subcontractors and do your due diligence on them
  • Don’t make the mistake of thinking general liability insurance covers bodily harm

If you follow these tips, you’ll greatly reduce the likelihood of an accident-related lawsuit from contracted employees by ensuring they are covered by their own insurance policies.