Workers Compensation Insurance

Workers’ Compensation insurance, sometimes referred to as Workers Comp, is the type of policy most commonly purchased by condo associations that is not required in the Illinois Condominium Property Act. Workers Comp insurance is a type of insurance purchased by employers for the coverage of employment-related injuries and illnesses.

Workers Comp is state mandated in Illinois for any employer with “W2’d” employees. If your association directly employs one or more persons, and issues them a W2, you are required to pay for workers compensation insurance.

Most condominium associations do not employ traditional employees, but workers comp can still be a smart idea. A workers comp policy will protect the association should any person that is performing work at the property become injured. This includes board members or unit owners performing any type of activity that could be considered work. (Gardening, spring clean-up, snow removal, lawn care, etc.) This includes owners or other persons that are performing work for free.

If your condo association pays any non-company entity to perform any duties at the property, no matter how minor, it is critical that you have worker’s company insurance. You may also want to carefully consider having this type of coverage if unit owners commonly perform work on the property, even on a volunteer basis.

This includes situations where a neighbor or a “a guy down the street” visits the property to perform certain duties. There is nothing illegal about paying these people to perform this work, but if they happen to become injured, the association can end up in serious financial trouble if a workers compensation policy does not exist.  

A Non-Employee Policy

There is a special type of workers compensation policy designed specifically for situations where a condo association does not have traditional direct employees, but has other types of persons performing duties. The policy, at the time of this writing, has a premium of roughly $600/year and provides the association with protection should any of these persons become injured or ill related to their work at the property.

If any of the following apply to your association, it is strongly suggested that you investigate this type of policy:

• Unit owners perform any type of work around the property (For free, or for pay)
• Board members perform any type of work around the property (For free, or for pay)
• The association pays any type of non-licensed company to perform services at the building. (If the company is licensed, they must pay for workers compensation for all of their employees)
• If the association has “group work parties” or other types of community events that could be considered work.

The Audit Process

Workers Compensation policies are unique in how billing is handled. Workers Comp policies typically cover a 12-month period. For example, a policy may run from 07/2016 – 07/2017.

The initial premium is based upon an estimate that is calculated by the insurance company. For most associations, using a “non-employee” policy as reviewed in the previous section, the calculation is simple. For a traditional employer, such as Connected Management, the estimate is based upon the estimated annual gross payroll figures. (Workers compensation policies are typically charged as a percentage of all employees’ total salaries)

Regardless, the initial estimate is calculated and that premium is charged throughout the year for the policy. At the end of the policy period, however, the insurance company will require an “audit” to determine if the employer owes the insurance company more money or if a refund is due. The audit compares the actual gross payroll of the employees versus the initial estimated figures.

In a normal audit the company must provide the insurance company with proof of employee salary totals, and the insurance company will determine if an additional payment, or a credit, is required.

For associations with “non-employee” policies, the audit form simply needs to be returned with a short note stating that the association has no direct employees. The audit is then closed and no payments or credits will apply.

If the audit form is not returned, however, the insurance company will create its own estimated employee salary totals and the result will be a very large bill from the insurance company. Due to this it is extremely important that these audit forms be handled properly and responded to in a timely fashion.