The Criticality of Enforcing Tenant Insurance Lease Provisions

Surprisingly, one of the most important lease provisions is often one of the most under-enforced. Most apartment leases explicitly require tenants to maintain renters’ insurance through the course of their tenancy. Yet, many, if not most, fail to do so. The result – owners and managers are being deprived of the critical benefits discussed herein.

Decreased Exposure for Tenant-Caused Losses: The absence of renters’ insurance increases the likelihood an owner is named in a suit for injuries caused by an uninsured tenant. For example, a dog attacks a tenant or guest. In most states, the dog owner is strictly liable for the injury. Meaning, the victim is not required to establish neglect on the dog owner’s part. If insured, the victim will often sue only the owner if the renters’ insurance coverage is sufficient to cover the loss. However, when no, or limited, coverage exists, the victims are prone to include the property owner and/or manager as an avenue for recovery.

Property Protection: While renters’ insurance primarily covers tenants’ personal belongings, it can also cover damage to the unit itself. This can minimize the financial burden on the property owner for repair or replacement due to tenant-related incidents.

Subrogation Pursuit: Where the owner’s property insurance covers a tenant-caused loss, the property carrier often obtains subrogation rights against the tenant and his/her renters’ insurance carrier. Through these rights, the carrier may recover some, or all, of the loss directly from the insured tenant. The significance is two-fold. First, the owner is often reimbursed for its deductible and/or uncovered damages through its carrier’s subrogation pursuit. Second, the carrier’s subrogation recovery may reduce the extent of the loss and, correspondingly, lessen the impact on the owner’s premiums and/or ability to obtain future coverage.

Lower Risk of Tenant Lawsuits: If an uninsured tenant's belongings are damaged due to an event such as a fire or flood, the uninsured tenant is more likely to pursue the owner. When insured, the tenant is apt to file a claim with its own carrier, as a more expedient means of recovery. Although the carrier may obtain its own subrogation rights, there is less likelihood of suit being filed.

CP Law Group specializes in the defense of premises liability losses. Its professionals have decades of experience defending owners and managers in property and personal injury lawsuits. The attorneys can offer guidance and direction on best practices for drafting and enforcing tenant-insurance provisions. And, if necessary, provide an aggressive defense of claims. For more information, contact Jonathan S. Wallack, Esq. via email at jwallack@cplawgrp.com or phone at (480) 667-7385.