In the world of personal lines insurance, a residence employee is “an employee of the policyholder whose duties are related to the maintenance or use of the residence premises, including household or domestic services”. They can also “perform similar duties elsewhere not related to the business of an policyholder”. The word “residence” here has nothing to do with where the employee lives. They can either live at the policyholder’s residence or have their own home.
So . . . residence employees are people the policyholder hires to mow the lawn, monitor the pool water, provide child care, clean the house, cook the meals (wish I had one of those), fix the plumbing, repair the garage door, etc. Generally, if the policyholder hires a company to do something related to the maintenance or use of the premises, and that company just sends someone to the home, then that person is not the policyholder’s residence employee because he didn’t hire them directly. The policyholder pays the company, and the company is an independent contractor hired by the policyholder.
We often get the question – is a residence employee an “insured” on the policy? The simple answer is no, because a policyholder is a separate category. However, can a residence employee obtain coverage from the homeowners policy? Will the homeowners policy provide the policyholder liability coverage if their residence employee is injured, or causes bodily injury or property damage to someone else, and the policyholder is sued? Let’s see.
What coverage can a residence employee obtain from the homeowner policy?
- The policyholder can extend his Coverage C to cover a residence employee’s personal property in any residence occupied by an Insured. Suppose there’s a kitchen fire and some of the residence employee’s personal property is damaged. The policyholder can ask his adjuster to pay for the residence employee’s personal property as long as a policyholder was occupying the residence at the time. “Occupying” doesn’t mean a policyholder had to be there when the fire happened, just that a policyholder was staying at the residence.
- If a residence employee is injured on any “insured location”, or if the injury arises out of the course of his employment, he can collect the policy’s Medical Payments. This is not true if the residence employee is covered by workers’ compensation.
- If a residence employee can prove a policyholder is liable for his injury on an “insured location” or anywhere else while he’s on the job, the residence employee can collect up to the policy’s Personal Liability limit. Again, this is not true if the residence employee is covered by workers’ compensation.
What coverage does the policyholder have for residence employee exposures?
The policyholder’s biggest exposures are injury to the residence employee and responsibility for the residence employee’s actions.
- The residence employee is eligible to receive Medical Payments as stated in #2 above.
- The policyholder has his Personal Liability limit to cover his responsibility for injury to the residence employee as stated in #3 above. The residence employee must prove that the policyholder is liable.
- Someone the residence employee injures on an “insured location”, or anywhere else if the injury occurs during the course of the residence employee’s work, is eligible to receive the policyholder’s Medical Payments.
- The policyholder’s Personal Liability limit covers his liability for bodily injury or property damage caused by the actions of the residence employee. Is the policyholder liable? That’s up to case law and the courts.
The Workers’ Compensation Exclusions
If the policyholder is looking for coverage under his homeowners policy for these exposures, he needs to understand the workers’ compensation exclusions.
- The policy excludes Personal Liability if the claimant is eligible to receive workers’ compensation benefits voluntarily provided, or benefits are required to be provided, by the policyholder.
- The policy excludes Medical Payments if the claimant is eligible to receive workers’ compensation benefits voluntarily provided, or are required to be provided, by anyone.
Let’s talk voluntarily provided workers’ compensation first. Can the policyholder buy a workers’ compensation policy for his residence employee(s)? Yes. If he does, that policy becomes the only coverage for medical expenses and lost wages, and Personal Liability from the homeowners policy is now excluded.
When is the policyholder required to provide workers’ compensation? In Florida if you have four or more full-time or part-time employees, you are required to provide workers’ compensation. If you have even one employee doing construction work, you are required to provide workers’ compensation. If the policyholder is required to provide workers’ compensation, then the homeowners Personal Liability coverage is excluded—whether the policyholder bought the workers’ compensation policy or not.
Could the policyholder hire someone directly that is an independent contractor? As opposed to a domestic worker, someone doing construction has a better chance of being an independent contractor generally categorized as:
A person who is paid for the entire job and not by the hour, supplies his own tools, and controls his method of work and operative detail.
The policyholder is NOT required to provide workers’ compensation if he hires an independent contractor. If he is not required to provide it, and he didn’t voluntarily provide it, then the exclusion is void and his homeowners policy Personal Liability will provide coverage if the policyholder is liable for the injury and no other exclusions apply.
Most policyholders would prefer to keep their homeowners policy free from these claims, and the best way to do that is to make certain other coverage is available. The policyholder can make sure people doing maintenance or providing domestic services are covered by workers’ compensation by:
- Hiring them through a company that provides workers’ compensation; or
- Hiring self-employed workers who have their own workers’ compensation.
For both of these situations teach your customer to ask for a certificate of insurance. They need not be shy about this, as any reputable company is used to this request and will gladly comply. Show them an example of a certificate and explain minimum coverages (general liability and workers’ compensation) the company or person should have.
It would also be helpful if the policyholder makes sure his residence employees have their own homeowners policy (HO3, HO4 or HO6) providing personal liability coverage. This would be the primary policy to respond if the employee is accused of injuring someone else or damaging his property.