Vendor Insurance Requirements: Protecting Your HOA from Hidden Liabilities

When vendors lack adequate insurance, homeowners associations (HOAs)—and in turn, property owners—often bear the financial burden for property damage, personal injuries, and legal claims. Whether it’s a tree trimming mishap, a chemical spill at the pool, or a faulty piece of equipment, HOAs can face thousands in legal and repair costs if insurance has not been properly verified. Therefore, enforcing strong vendor insurance requirements is essential for shielding your community from liability.

The Financial Reality: Who Pays When Things Go Wrong?

Many HOAs do not realize the extent of financial exposure they face when vendors operate without proper insurance. The consequences of hiring an uninsured or underinsured vendor may include:

• Special assessments levied against homeowners to cover claims
• Higher insurance premiums due to HOA policy usage
• Legal defense costs, even when the HOA is not at fault
• Direct liability for injuries or property damage

Without clear vendor insurance requirements and verification procedures, the HOA’s financial health is at risk.

Essential Insurance Requirements for All Vendors

To properly mitigate risk, HOAs should require every vendor to carry the following baseline coverages:

• General Liability Insurance: At least $1–2 million per occurrence and $2–4 million aggregate
• Workers’ Compensation: As mandated by state law for all employees
• Commercial Auto Liability: Minimum of $1 million for all vehicles used onsite
• Professional Liability (Errors & Omissions): Required for vendors offering specialized services

Industry-Specific Insurance Requirements

Certain vendors pose unique risks and therefore, require more tailored insurance protections. Here are a few examples of these types of vendors:

• Pool and Spa Maintenance Professionals. Specialized insurance may include: pollution liability for chemical spills and water contamination; equipment breakdown, which covers filtration and pump systems; and completed operations—extended liability after a job has been completed.
• Security Services. These providers should carry: errors and omissions insurance (for failure to perform contractual duties); assault and battery coverage, which protects against altercations that occur on the property; and cybersecurity insurance, covering data breaches in access control systems.
• Medical Equipment Providers. Certain communities—such as those that include assisted living facilities or onsite healthcare services for residents—may contract with medical equipment providers. These providers should carry: product liability insurance, which covers defects or malfunctioning equipment; professional liability insurance for improper fittings or usage recommendations; cyber liability, which protects patient health data under HIPAA regulations; and equipment coverage for loss or damage of expensive medical devices.

Real-World Consequences: What Happens When Coverage Falls Short?

In HOA communities across the U.S., lawsuits have highlighted the consequences of working with vendors who lack adequate insurance coverage. Consider the following real-world cases:

• Pool Chemical Incident (Riverside Gardens HOA v. AquaCare Services). This 2019 case from Orange County, California involved an uninsured pool contractor who mismanaged chemical storage, thereby exposing residents to toxic gas. The HOA incurred $150,000 in medical bills, environmental remediation, and legal fees.
• Medical Equipment Malfunction (Sunset Village Condo Assoc. v. MobilityFirst Equipment). After a faulty mobility scooter from an underinsured vendor injured a resident, the HOA paid $80,000 in damages, leading to this 2020 case from Fairfax County, Virginia.
• Tree Removal Damage (Pine Ridge HOA v. TreeCare Solutions LLC). In this 2021 case from Harris County, Texas, a branch from an uninsured tree removal company fell, damaging vehicles and roofing. As a result, the HOA paid $45,000 through a special assessment.

Vendor Insurance Checklist

 To ensure adequate vendor coverage, your HOA should adopt the following protocols:

• Require certificates of insurance before any work begins
• Confirm that coverage meets or exceeds minimum standards
• Require the HOA to be listed as an additional insured
• Ensure that a 30-day cancellation notice clause is included
• Verify insurance carrier ratings (A.M. Best A- or higher)
• Review policy exclusions and limitations
• Maintain updated certificates in vendor files
• Include detailed insurance clauses in all contracts

Enforcing vendor insurance requirements is not just about risk management—it’s a financial imperative. The costs of oversight or leniency can devastate an HOA’s budget and reputation. By proactively implementing strong requirements and rigorous verification protocols, your HOA will be empowered to avoid surprise liabilities and maintain long-term financial health.

Need help reviewing your vendor risk protocols?

Clear View HOA Financial can work with your board to verify that insurance requirements are built into your financial strategy—thereby keeping your community safe, secure, and solvent. Contact us today to request a custom quote!