I’m reading this lease we have for a new property and both the property manager and the landlord want to be named as additional insured on our renters insurance.
I have no problem naming them as additional interests, but to name them as additional insureds doesn’t make any sense to me - maybe they actually just want to be named as interests, and don’t know the difference?
My understanding is that in a situation where the landlord and myself are named in a lawsuit, the LL’s insurance and my insurance will both be involved in the defense until the case settles or either one gets their name off the suit. Whatever the scenario, if necessary, one insurance can subrogate the other. However, as I understand it, if we’re both insureds on my policy, the landlord would not be able to collect from me under my liability policy because it doesn’t cover claims amongst insureds (although not sure if that includes additional insureds). Similarly, I and/or my insurance company would not be able to collect from the landlord because they would immediately file a liability claim with my insurance company, and obviously my insurance company would then deny my claim.
I just don’t understand the logic in wanting to be named an additional insured if they have their own insurance. Has anyone seen this/do other landlords do this?
I had never heard of such a thing until a recent move. Circumstances were such that I did not delve into it too much. I was also finding an insurance agent in the new state and he implied it was standard practice. I’ve since found a more knowledgeable agent, but am no longer at an apartment.
I figured the landlord had minimal liability insurance and not a lot of confidence in their buildings. It also looked like that they spent a lot more money on their legal department than engineering or construction. We took a year’s lease and were thankfully out after 10 months.
From reading the language about an additional insured, it seems like the landlord would only be covered based on my own actions. So if I bear no liability for a harm, my insurance policy wouldn’t cover the landlord’s liability. But my liability is already covered by my insurance, so the only benefit seems to be when my landlord is named in an action but I am not. I cannot picture a scenario where that’s the case, and the judge would almost certainly try to bring me into the action anyway.
You might rethink that — for one, there is always tenants’ liability, and you might want to have them insure it to some amount ($500k). Also, if the tenants stuff is damaged (for any reason), you don’t want them coming after you for those costs. Finally, if the tenants’ acts or failures to act cause harm to third parties (a condo common element, or an apartment building component for example), you will want them insured for such matters.
In any case, be sure you have enough liability insurance to cover your net worth regardless of how the rental properties are titled and held.
My theory on these matters is to ensure that my tenants have liability insurance and that I am on their policy as an additional interest. This ensures that I am notified if their policy lapses for any reason or there are some other issues with their policy. I don’t care about their contents, but I strongly advise them to insure them.
In a residential rental, there are several issues with the landlord being addresses as an additional insured. Among them are dilution of coverage especially if the landlord’s policy has higher limits than the tenants’. The landlord is usually also at the mercy of the tenants’ insurance policy when it comes to defense when listed as an additional insured. Also, the landlord cannot make a claim against a policy on which he is listed as an additional insured, so if the tenant’s neglect causes harm, there is at a minimum a conflict of interest that needs to be sorted out by the insurance adjusters as well as liability limits if the tenants’ policy is too low.
While being listed as an additional insured transferred some of my risk to that of my tenant, it could create more problems than solves.
Best to have each entity insure his own exposures, and for a residential or habitational landlord to require being listed as an additional interest.
There are several possibilities involving third parties where there may be some sort of vicarious liability (or at the very least, a theory of recovery under vicarious liability).
A potential scenario is the person in the apartment above has a leaky toilet, doesn’t fix it, water builds up in the walls, collapses into the unit of the tenant below. The tenant below may have a claim against the landlord for the landlord’s own negligence directly, or indirectly through some vicarious liability. Either way the landlord/landlord’s insurance will want a way to collect from the upstairs tenant under the tenant’s liability policy. Further, you as the landlord are going to lose revenue from not being able to rent out that unit below/be forced to put that person up in other accommodations. As a landlord, maybe your insurance would cover it, but the upstairs tenant’s liability policy may be an option for your insurance to subrogate.
Disclaimer: My knowledge of insurance is based on my own personal limited research just in the last several days. These are just guesses.
^This. I own a small commercial condo which I rent out. My condo fee includes general liability. Tenant responsible for their property damage so I don’t have any insurance. Water heater broke flooding the unit. Tenant had insurance. Their insurance adjuster called me asking for my policy number saying my policy would be the primary. I said I didn’t have insurance. He was speechless for a few seconds and then went on about how property owners are required to have insurance. I told him the condo association has liability but it’s the tenants option to purchase property damage coverage. We went back and forth but eventually they paid the tenant.
Your net worth is pretty irrelevant. You want liability limits that cover your potential liability. It doesnt matter if you have a net worth of $50k or $5 million, a claim of $500k with a coverage limit of $300k will leave you on the hook for the remaining $200k.
If a guest slips on the sidewalk, both the tenant and landlord are going to be sued. With a third-party claim, I cant see many instances where there wouldnt be mutual liability (or rather, the claim of mutual liability - ie, sue everyone and hope something sticks).
The relevance is in that if the incident happens on the landlord’s property, they’re going to be sued as well, and could potentially be held partially liable . Being an additional insured provides them with a defense under your policy, rather than their own.
I thought, and I may be wrong, that on a property insurance policy, being named as an additional insured will cover you for any claims that result from that covered property. Being named as an “Additional interest” merely means you have reason to care that the insured has the coverage for themselves.
I suspect, and I think it’s also the point you are making, that being an additional insured doesn’t provide as much protection as some think it does. But there is a benefit.
Good point, this is true I believe, and could be why they want it. But wouldn’t the landlord just have to have any liability insurance for a legal defense to be covered? Do legal representation fees eat into the policy limits? If they only had $100k in liability coverage, would their insurance stop defending the suit once the defense fees reached $100k?
Additional insured is only about liability. Since the landlord has no insurable interest in the tenant’s personal property, they can’t be insured under that coverage. And yes, as I understand it, being an additional interest would just notify that party that a policy has lapsed (and maybe similar things), but it would provide no actual policy benefit to that party.
I never followed up. It’s just a 950 SF space so as long as I get a rent check every month, that’s all I need. Tenant still there so I assume any carpet, trim or drywall damage was taken care of either by them or their insurance.