Friday, December 4, 2009

Our Association Doesn't Need Worker's Compensation Insurance, Does It?

Your association is self-managed or is managed by a property management company, and you don't have any employees. If you don't have any employees, you don't need workers' compensation insurance coverage, right? Well, the answer is the association probably does need that coverage.

Recently an association was called before the Virginia Workers' Compensation Commission to show cause as to why it should not be fined for failure to have workers' compensation coverage in place. That association was managed under a contract with a professional management company, had five uncompensated, volunteer board members, and no paid employees. The deputy commissioner hearing the case found that the association was required to have workers' compensation coverage in place for two reasons:

1) The association has executive officers who are not exempt and are thus considered employees; and

2) Individuals who perform maintenance, repair, etc. of common areas may be deemed to be statutory employees, and therefore may be eligible to make a claim under the association's workers' compensation coverage.

Section 65.2-101 of the Code of Virginia, part of the Workers' Compensation Act, defines an employee as an executive officer, including president, vice-president, secretary, treasurer or other officer, elected or appointed in accordance with the charter and bylaws of a corporation, but does not include non-compensated officers of corporations exempt from taxation pursuant to Section 501(c)(3) of Title 26 of the United States Code (primarily charities). In addition, because subcontractors are performing services that are part of the trade, occupation or business of the owner, then they are deemed employees for the purpose of workers' compensation coverage. For example, a contractor who performs maintenance on the association's common areas could be deemed a statutory employee of that association.

Associations obtaining this coverage report that the cost is approximately $400 to $750 per year. The cost of this coverage may be a small price to pay for the peace of mind of protecting against a possible workers' compensation claim or being noticed for a hearing before the Virginia Workers' Compensation Commission, however some associations may believe that $750 per year is too costly.

You should also contact your association attorney and insurance agent for more information about whether your association should have workers compensation insurance coverage and the cost of a workers compensation policy.

Posted by Michele A. Mulligan

American Flag Controversy in Richmond, VA; Part 2

Approximately ten years ago a large community association told a Vietnam veteran that the American flag he was flying at his home was in violation of the covenants of the neighborhood. The case went to court and that homeowner lost the legal case, with the court finding that the owner was in violation of the covenants of the association.

Thereafter, the Virginia legislature enacted a statute to address the display of the American flag. Section 55-513.1 of the Virginai Code states that an association may not prohibit an owner from displaying the flag unless such a prohibition is in the associations' rules, provided in the disclosure packet given to all new homeowners. The association may also reasonably restrict the time, size, place, duration and manner of placement or display of the flag.

Now, one of the oldest living World War II Medal of Honor winners has been told by his association that he must remove the flagpole in his yard because it is not aesthitically pleasing. This matter has received national attention, and the ACLU as well as Virginia Senators Mark Warner and Jim Webb have interceded. The association and the owner are discussing a resolution to the situation.

This situation highlights how an association may be correct in attempting to enforce their covenants and rules and regulations, but can often face a firestorm for doing so. The number of community associations, and people living in them, are growing, but often you find that people are unaware of the restrictions imposed by the neighborhood until they find themselves in violation of them. Frequently, the association, rightly or wrongly, is seen as overbearing and unreasonable when they attempt to enforce the restrictions. Emotions can run high when you are dealing with people's homes. This underscores how important it is for an association to be mindful of the approach it takes in dealing with many of these situations. The importance of enforcing the restrictions must be tempered with reasonableness, and most importantly, the manner and approach taken in enforcement can be critical to avoid an escalation of the situation, including being seen as the "bad guy" in your city, town or nationwide.