HOA Workers

California homeowner associations (HOAs) and HOA management companies will want to pay attention to a recent ruling coming out of the state’s Second Appellate District. The case, Heimen et al. v Worker’s Compensation Appeals Board (WCAB), involved the claim of a worker injured on association property for workers compensation benefits.

The petitioner, Robert Heimen, did business as Pegasus Properties, a property management business. Pegasus had entered into a management agreement with Montana Villas Homeowners Association. At an association meeting, the HOA agreed with Pegasus’ recommendation that rain gutters be installed on part of the condominium building.

Pegasus hired Mark Hruby, doing business at Rube’s Rain Gutter Service, to install the gutters. Hruby in turn hired Freddy Aguilera to perform some of the work. According to the court record, “On November 5, 1977, the first day of the job, a rain gutter contacted a high voltage electric wire and Aguilera was severely shocked and fell and was seriously injured. Hruby completed the job and was paid by check.”

Hruby was not a licensed contractor and did not carry workers compensation insurance.

Aguilera filed a claim naming Hruby, Pegasus, the HOA, and the individual condominium owners. An administrative law judge determined that, “Hruby was the employer of Aguilera and was liable for workers’ compensation including 90 percent disability.” Subsequently, WCAB concluded that, “Hruby was hired by Pegasus, ‘a professional property management business’ and ‘an agent for the homeowners’ association’ and ‘therefore under Labor Code section 2750.5 became the employer of applicant, Freddy Aguilera’.” The Board awarded workers’ compensation to be paid by Pegasus.

So Pegasus appealed.

The appellate court’s decision contains a detailed discussion of the law. The bottom line is this: “Among the legal consequences of hiring an unlicensed contractor who is injured or whose employee is injured performing the work is that different employment relationships may arise with respect to ‘employer’ liability for workers’ compensation or tort damages.”

The court held that Hruby and Pegasus were dual employers of Aguilera and that, under the labor code, they were jointly and severally liable for workers’ compensation benefits. Moreover, the court found that Pegasus was acting as an agent for the HOA. Therefore, “liability for an agent’s authorized acts may be imputed from the agent to the principal.” That is, the HOA has liability as well.

There are lessons to be taken. Don’t hire unlicensed contractors who do not carry workers’ compensation insurance. Just because someone says, “This is an independent contractor relationship,” doesn’t make it so.

No license, no insurance, no hire.

Don Way
CEO

Uninsured Grads

Many recent graduates don’t buy health insurance when they graduate from a University. Young adults ages 18 to 24 were least likely of any age group to have health insurance, according to the National Coalition on Health Care.

Some young adults don’t realize they usually are dropped from their parents’ insurance policies when they are no longer full-time students.

Not having health insurance carries serious risks. Certainly, one is having a life-threatening medical emergency without the resources to pay for care. And there is the risk that if you have a lapse in coverage and develop a serious illness, it could be much more difficult—and costly—to get health coverage later.

A good place to look for health insurance is the alumni-relations department of your college or university. Pennsylvania State University offers short-term insurance plans through GradMed. Roger Williams, executive director of the Pennsylvania State Alumni Association, says one advantage of going through GradMed for Penn State alumni is that there is no waiting period for coverage. No medical exam is required for new enrollees, but pre-existing conditions aren’t covered. Mr. Williams says that in July 2006, Penn State had 1,635 policies in effect.

Health Premiums Rise

Premiums for employer-sponsored health insurance rose an average of 6.1 percent in 2007, according to the 2007 Employer Health Benefits Survey released by the Kaiser Family Foundation and Health Research and Educational Trust.

The 6.1 percent average increase was the slowest rate of premium growth since 1999, when premiums rose 5.3 percent. Since 2001, premiums for family coverage have increased 78 percent, while wages have gone up 19 percent and inflation has gone up 17 percent.

The average premium for family coverage in 2007 is $12,106, and workers on average now pay $3,281 out of their paychecks to cover their share of the cost of a family policy.

“We’re seeing some moderation in health-cost increases, but premiums for family coverage now top $12,000 annually,” Kaiser President and CEO Drew E. Altman, Ph.D., said. “Every year health insurance becomes less affordable for families and businesses. Over the past six years, the amount families pay out of pocket for their share of premiums has increased by about $1,500.”

The annual Kaiser/HRET survey provides a detailed picture of how employer coverage is changing over time in terms of availability, costs and coverage for the 158 million people nationally who rely on employer-sponsored health insurance. It was conducted between January and May of 2007 and included 3,078 randomly selected, non-federal public and private firms with three or more employees (1,997 of which responded to the full survey and 1,081 of which responded to a single question about offering coverage).

While premiums continue to rise faster than workers’ wages, this year’s gap of 2.4 percentage points is much smaller than the 10.9 percentage point gap recorded four years ago, when premiums rose 13.9 percent and wages grew just 3 percent.

However, “despite the comparatively low rate of increase in premiums and a strong labor market, the percentage of the workforce obtaining coverage from employer-sponsored plans remained unchanged since 2006,” reports the Health Affairs article by Kaiser’s Gary Claxton and coauthors. The 60 percent of firms offering health benefits to at least some of their workers is statistically unchanged from last year’s offer rate (61 percent). The offer rate remains significantly lower than it was in 2000, when 69 percent of firms offered health benefits. Nearly all (99 percent) of large businesses with at least 200 workers offer health benefits to their workers this year, but fewer than half (45 percent) of the smallest firms with three to nine workers do so.

ERISA Bond Provisions Updated

The Employee Retirement Income Security Act (ERISA) required a plan fiduciary and any person handling plan assets to be bonded in an amount between $1,000 and $500,000.

The 2006 Act increased the maximum bonding requirement from $500,000 to $1,000,000 if the plan holds “employer securities.” An employer security includes any stock issued by an employer of employees covered by the plan. The higher bonding ceiling applies beginning with the 2008 plan year.

New York Law Ruffles Feathers Nationally

Employers, insurance agents and brokers across the country are up in arms about a New York law effective September that apparently requires the employer of any person doing work in New York to have a workers’ compensation policy issued by a state-licensed carrier or the New York State Insurance Fund. The way the new law is written means that even employers of a traveling salesman from Podunk, Idaho or someone attending a one-day meeting would have to secure a New York policy.

The new law was part of a larger workers’ comp legislative package and went unnoticed during debates on the measure. But industry experts familiar with the law say there is no need to jump to conclusions, and that New York authorities are working quickly to remedy the law’s language.

“If you are California-based and you go to another state and are injured on business, you are covered by the laws of California,” says Mark Webb, Vice President of government affairs for Employers Direct Insurance Co. “But what New York is saying is that because of this change in the statute, when I go to New York, I have to either have New York coverage on my California workers’ comp policy, or I have to purchase a separate policy in New York.”

For obvious reasons, this new law caused instantaneous alarm throughout the industry, but the issue didn’t actually become a problem until after the original piece of legislation was signed, says Tim Dodge, director of research and external communications for the Independent Insurance Agents and Brokers of New York. “This is turning into a major headache. New York enacted a workers’ comp reform law last March. It was [70-plus] pages long. This was one small provision of the law,” says Dodge. “I don’t think that anyone even noticed this piece of it.”

The New York State Workers’ Compensation Board and Independent Insurance Agents and Brokers of New York met to discuss the problem. “The worker’s compensation bureau has said, ‘Okay, we understand there is a problem, so we’re just going to have a time-out and not enforce this until we figure out what we are going to do,” says Webb. So now it’s back to the drawing board.

The officials reported that the new requirement is “on hold” at this time. To that effect, the board has posted an announcement on its Website that it is “currently reviewing (the) provision, along with the comments and concerns of its stakeholders, and seeking appropriate assistance to develop the rules implementing the section of the new law.”

The officials confirmed that out-of-state employers with an incidental exposure will not be subject to the New York law requiring employers to provide disability coverage for their workers. An out-of-state employer needs a New York State disability benefits insurance policy if it employs one or more individuals on each of at least 30 days in a calendar year in New York.