There is no question that a community association benefits when its unit owner membership is interested and involved in the life of the association. Suchinvolvement is evident in associations in which unit owners serve as active and engaged volunteers. Unit owner volunteers can serve their associations in numerous capacities, from advising the board on a landscaping committee or planning the annual holiday party, to tasks that involve rolling up the sleeves, like an annual clean-up day or maintaining the flower beds at the clubhouse. Creating opportunities for and encouraging unit owners to volunteer should be applauded in any community association. It can not only save an association money but it can build a spirit of community that makes the living experience much more enjoyable for all residents. However, unit owner volunteers can pose a risk of liability for the association in sometimes unexpected ways. This article will highlight areas of risk and steps that can be taken to avoid exposure.
...unit owner volunteers can pose a risk of liability for the association in sometimes unexpected ways.
Liability and D&O Insurance:
A board member and/or an association can be sued for the actions a board member takes on behalf of the association. While certain activities are more likely to generate claims than others, no action taken by a board member is without risk of suit. Recognizing that possibility, most governing documents indemnify the board member for actions taken in their role as board members except in the most egregious of circumstances. Additionally, given the liability risk, most associations understand the need for Directors and Officer’s liability insurance (“D&O Insurance”) and have policies in place which provide insurance defense and, where necessary, indemnification to the board members and/or the association in the event a lawsuit suit is filed in connection with a member’s actions on behalf of the association while serving on the board. Liability in this context can stem from the actions a board member takes or fails to take. While acting reasonably in any given circumstance is a likely means of avoiding liability in most circumstances, often times the costs associated with defending against a claim can be significant. For that reason, even the best run associations and most reasonable boards benefit from insurance coverage.
However, complications and potential gaps in coverage arise when the individual acting on behalf of the board is a volunteer and not a board member. In a circumstance where a unit owner volunteer has been specifically authorized to act on behalf of the association in a particular area, that volunteer may be viewed as an agent of the association. Even in circumstances where no specific authority has been vested in the volunteer, their role may create a circumstance where the volunteer appears to have been acting on behalf of the association and they may be treated as an agent of the board. In either case, as an agent of the association, the volunteer’s actions or inaction may be imputed to the board, that is, the board may be held liable for the actions of the volunteer. The complications in such circumstance can be significant. For the volunteer, they may find that because they are not a board member, they are not indemnified by the association and that the association is not required to defend them or pay any judgment that might enter against them. The volunteer may also learn that the association’s insurance policy does not extend coverage to volunteers. From the association’s perspective, it may learn that the volunteer’s action have exposed it to liability but that the association’s policy provides no coverage because volunteers are not identified as insured under the policy.
While one approach to addressing this issue could be to ban volunteers, but that approach is not realistic and, as discussed above, that step would deprive the association of substantial benefit. The more realistic and beneficial approach would be to consider the following steps:
- clearly limit the volunteer role in this context to advisory and confer no independent decision making authority on the volunteer (a good practice generally as the board should be making decisions by a majority vote) and ensure that the volunteer’s limited decision making role is well publicized;
- amend the documents so that volunteers are indemnified by the association. That step should be taken in consultation with counsel and it may not be advisable or palatable in all circumstances. While addressing a concern for the volunteer, such step would increase the association’s exposure and would almost certainly have to be coupled with securing a policy of insurance which extended to volunteers;
- the volunteer should determine whether its homeowners policy provides coverage and, if not, explore whether such coverage can be added to the policy;
- ensure that the association’s D&O policy extends to volunteers and treats such volunteers as insureds in every instance as is necessary to provide the association with defense and indemnification in the event an action or inaction by a volunteer results in a lawsuit against the association. The board should consult with its insurance agent or other insurance consultant with regard to the placement of the policy.
There is, similarly, liability risk for the association in those circumstances where the unit owner volunteer is engaged in physical activity on the property. While it is obvious that when an association hires and pays an employee to perform services on the common areas, the association must provide worker’s compensation insurance to that employee. It is also necessary, though sometimes less obvious, for an association to ensure that the contractors it engages provide worker’s compensation insurance for all the employees that enter and perform work on the common areas as the association could be the target of a claim under the Worker’s Compensation Act by any injured employee of a contractor it engages.
It is far less obvious, and often times overlooked, that volunteers who perform regular activities on behalf of the association could be considered employees under the Worker’s Compensation Act. That is not to suggest that any action taken by a unit owner as a volunteer makes them an “employee” for purposes of coverage under the Act. If a unit owner sees some trash on the ground and picks it up or sees a weed growing in a flower bed and pulls it, that random, one-off activity is highly unlikely to result in a unit owner volunteer being treated as an employee. However, where a unit owner volunteer regularly performs work on behalf of the association there is real risk that an injury to such volunteer could result in a claim under the Worker’s Compensation Act. The problem for the association in such circumstance is that the standard worker’s compensation policy provides coverage only to paid employees not to unpaid volunteers that might otherwise fit the definition of employee. If a volunteer is injured in such circumstance the association may have liability under the Act which includes medical bills which can be significant. It is advisable, therefore, that the association not only obtain a worker’s compensation policy, but that the policy extend to unit owner volunteers.
The presence of unit owners willing to volunteer their time and talent is a fundamental good in most community associations. With some simple advance work and planning the risks associated therewith can be effectively managed so that the benefits are not outweighed by the potential downsides.
Originally posted September 6, 2018 on
Tom is a former REBA President (2010), Co-Chair of both REBA’s Residential Conveyancing and Unauthorized Practice of Law Committees, and a founding partner of Moriarty Troyer & Malloy, LLC.