Cities and counties often lease or give permits for building, street or park space for fairs, parades, marathons, fireworks, conventions, weddings, etc. In addition to permits and leases revenue, events can attract visitors, bringing even more revenue to the city and its businesses. Yet they may lease space without proper coverage. The contract should require proof of Workers' Compensation (Work Comp) coverage. Sometimes this requirement is removed, most commonly due to cost or "exemption."
Many Work Comp policies have high minimum premiums - a valid concern. Though they remain liable, organizations can legally go without coverage in many states. In Florida you may not need to carry Work Comp if you have only 3 employees. In Texas, owners and executives can choose to be excluded - though the certificate may not mention it. A good tip for risk managers is to require that the certificate show whether anyone is excluded.
It's easy to see why the issue isn't pushed. Will a town ask its citizen to provide Work Comp for his family reunion? While this may not historically be the case, he isn't very different from any other tenant of commercial property. Under a long term lease he'd need to furnish proof of coverage. He may not think he's performing "work", yet may arrange catering, entertainment, decorating or other work for his event - he may become a General Contractor.
Some states require General Contractors to provide Work Comp for uninsured subcontractors, or remain liable. Contractors and their helpers, spouses or kids may disagree with a definition of "independent contractor" in an injury or death. Then, people look for coverage somewhere. Laws change, and it's easy to overstep boundaries separating employees and contractors. Sometimes telling workers what time to be there and what to put where may be enough to blur the line.
When the status isn't clear, people may look to the city for coverage. Liability can tend to go up the ladder until someone can pay, so improper coverage is a real concern for cities. Those who believe legislative immunity would absolutely protect them might ask if and why they provide Work Comp for their employees. If coverage is not available under the city's Work Comp policy, another likely place to seek coverage is its General Liability (GL) and Umbrella insurance.
Vicarious liabilities are the coverage "trigger" of concern for GL and Umbrella. These liabilities come from responsibility for the actions of others through a legal duty. They may include ensuring that all workers are covered. City contracts usually require Work Comp, so we could argue they're aware of the risk in advance. Claims against the city's coverage for short-term tenants and contractors without coverage could mean higher premiums for the city, even insurability problems. There could be no coverage, but the city could be liable. And insurance companies sometimes audit and charge additional premium for this risk.
The best bet for any public entity is to insist on coverage for all tenants and workers. Expect resistance, but the city's risks are too great to ignore. However, it's best to work with your community to find solutions everyone can live with.
An alternative in most states is Occupational Accident paired with Contingent Liability. Though policies vary, generally they're designed to cover certain claims from a work-related injury or death for a certain period. Contingent Liability steps in to perform similar to Work Comp if a contractor's deemed to be an employee of the policyholder. Cities and counties should be named as Additional Insured and receive a copy of the endorsement with the certificate.
Because of the limited benefit period, Occupational Accident is usually more affordable than Work Comp, and because Contingent Liability only steps in if a worker's deemed to be an employee, its cost is usually lower too. Some insurers offer these on a short term basis, which means even more savings for the citizen holding an event on city property.
Because there can be significant savings and they're designed for non-employees, the two main objections to coverage are met at once.
Contact your agent or broker about alternatives in protecting the city's own coverage limits, pricing and insurability. Especially in a tight economy, being able to accept lower priced options from your citizens can help everyone, meaning more revenue and successful events in its facilities.
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