Question: I am a tenant, and the owner of my apartment complex recently sent notification to the residents that we are required to have $100,000 renter’s insurance coverage in case of damage to the apartment as a condition of our lease. We are also required to include the apartment complex as an additional insured and a vested party for reimbursement should there be any damages.
If we don’t follow through, we are told that we will be in violation of the lease. I live in a one-bedroom apartment and currently have insurance coverage for far less than the amount that they are requiring, and it does not include reimbursing the apartment complex for any damages.
Is what they are doing legal? Can they force me to get extra coverage that I don’t need that also includes reimbursing them as well? I was told that they should have their own insurance to cover loss.
Property manager Griswold replies:
Yes, I believe that they can make renter’s insurance a requirement of your lease as long as they are consistent and apply their policy to all tenants. From the landlord’s point of view, the issue isn’t whether you have possessions that need $100,000 in insurance coverage but that you or your guests could create a situation in which major damage occurs — fire, flood, etc. That is the reason they are setting the minimum amount at $100,000 and insisting that the apartment ownership entity be named as additional insureds under your renter’s insurance policy.
The apartment complex likely has its own insurance coverage that has much higher levels of coverage for all types of losses. Their policy could have a requirement that states that all tenants must have renter’s insurance. Note that the owner’s insurance policy will generally not provide you with an insurance protection for loss or damage to your personal property unless it is due to some negligence on the part of the owner. The renter’s insurance and the owner’s insurance work together to provide more thorough coverage, and I would suggest you contact your insurance agent and seek to increase the policy limits to $100,000.
Generally, it has been my experience that if you currently have a renter’s insurance policy, the increased premium to raise the policy limits to $100,000 should not be that significant on an annual basis. And hopefully you are right that this is coverage you never need, but that is always true with insurance — you hope you never need it but the peace of mind of having the coverage is worth a lot.
Question: I have been renting a property for four months. I accidentally set my trash can on fire by throwing away some ashes that I thought were out but apparently were not. Parts of the cabinet were burned. My landlord has insurance over such events, yet I unfortunately do not have renter’s insurance. My landlord’s insurance company is going to pay for the damages and then demand that I reimburse them. The accident was my mistake, but isn’t that what the insurance company is supposed to cover? Am I legally required to pay for damages even though my landlord has insurance over such an event?
Property manager Griswold replies:
I would say you are responsible and the owner’s insurance company is acting reasonably is seeking reimbursement from you for the expenses it incurs in covering this claim. While every landlord should have insurance, the owner’s insurance is not to protect them from situations that are created by their tenants. The owner’s casualty insurance covers claims due to losses from fire, but they also have coverage for other claims but not for situations created by their tenants. Insurance for landlords and tenants are not like the “no-fault” car insurance concept, but are based on proximate cause. The key question is: Who is liable?
If the situation were reversed (as it often is) and something happened (like a fire resulting from a malfunctioning electrical outlet in your rental unit or another unit) and your personal property was destroyed, you would submit a claim to your renter’s insurance carrier and they would pay you and then subrogate (seek reimbursement) against the owner’s insurance policy since they are liable for the cause of the fire. In this situation, the fact that your negligence in starting the fire was unintentional doesn’t change the fact that you are responsible. It has been my experience that many fires are caused accidentally by tenants while cooking or by unintentional tenant negligence through improper use of appliances or extension cords. That is one of the reasons renter’s insurance is a good idea and worth the few hundred dollars per year. I suggest you negotiate some sort of payment plan with the insurance company and then immediately check into a renter’s insurance policy.
This column on issues confronting tenants and landlords is written by property manager Robert Griswold, author of “Property Management for Dummies” and co-author of “Real Estate Investing for Dummies,” and San Diego attorneys Steven R. Kellman, director of the Tenant’s Legal Center, and James McKinley, principal in a law firm representing landlords.
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