Picture it: El Nino '98. Your Association's roofs have taken quite a beating. They won't last much longer, so the Board quickly puts the needed repair work out for bid. Just as quickly, in flies the lowest bid, from Fly-By-Night Roofing, Inc., a company which just so happens to have a crew ready to start work the very next morning. What luck. The Board instantly approves the contract; but in the rush to get started, no one remembers to get those very important certificates of insurance. Make that what bad luck.

After the first day's work, the crew begins to put down tarps to protect the roof surface it uncovered during the day. A powerful gust of wind catches a tarp, causing the two crewmembers to lose their balance and fall off the roof. One dies instantly and the other is paralyzed permanently from a broken neck. Both workers were less than 30 years old, each with a wife and two young children.

Shortly thereafter, the Association learns that Fly-By-Night has $500,000 in general liability insurance, but no worker's compensation insurance. Joe Scuz, Fly-By-Nights' owner, signed the contract using a fictitious contractor's license number. Additionally, Scuz has inexplicably disappeared, leaving the Association to face a wrongful death claim and a claim for personal injuries, lifetime care and permanent loss of wages for the paralyzed worker. The Association's $2,000,000 general liability coverage is inadequate to cover both claims. But surely the Association cannot be held liable...or can it?

In a recent San Mateo County case, a California appellate court ruled that a worker whose employer failed to carry worker's compensation insurance had the right to pursue a lawsuit against the non-negligent homeowner who hired the contractor. In Andreini v. Superior Court , 98 Daily Journal D.A.R. 757 (decided January 21, 1998), an employee fell from the Andreinis' roof after losing his balance on a windy day while painting the chimney. The contractor failed to carry worker's compensation insurance, so the employee sued the Andreinis.

The Andreinis sought to rely on a California Supreme Court decision, Privette v. Superior Court (1993)

5 Cal. 4th 689, which held that the non-negligent homeowner could not be held liable to an injured worker who was covered by the contractor's worker's compensation policy. However, the Appellate Court was not persuaded, stating that the reasons cited by the Supreme Court in the Privette case did not apply under circumstances in which the contractor failed to provide worker's compensation insurance and ruled against the Andreinis.

While the legal analysis used by the court is not important, the result of the case is critical. The basic principle is that, if a party hires a contractor who did not purchase worker's compensation coverage, the non-negligent party can be held liable for injuries to the contractor's worker when that worker is performing an inherently dangerous activity. This policy applies primarily to prevent the burden of the injury from falling on the shoulders of the person least able to pay. Although this may be a harsh result for the non-negligent homeowner (or Association), the fact is that the result easily can be avoided by hiring only contractors whose workers provide proof of current worker's compensation coverage.

If an Association fails to take this basic precaution, undoubtedly the Association's general liability coverage will be called on to defend the claim, the result being a serious impact on future premiums or the ability to renew its insurance

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