Apartment owners operate in an extremely litigious environment. That’s why robust general liability coverage is absolutely essential part of your Landlord Insurance package.
A typical general liability form has three core coverage sections:
- Coverage A covers bodily injury and property damages, for example, if someone is injured on your property and decides to sue.
- Coverage B covers personal and advertising injury, for example, if someone claims that you have slandered them or infringed on their copyright.
- Coverage C covers medical payments, for example, if someone is injured on your property and the matter can be resolved without the need for litigation.
Below are three common liability scenarios as well as information about how your liability insurance policy can help protect your business.
Liability Scenario #1: Premises Liability and Negligence
As a landlord, you have a duty to maintain safe premises for residents, visitors, and the general public. If you fail to do so, and someone is hurt or killed as a result, you can be held responsible.
For example, if there is a fire, could the fire have been prevented or the damage mitigated through the use of smoke detectors, fire extinguishers, and accessible fire exits? If there is any question, you may be hit with a lawsuit alleging negligence.
Fortunately, most bodily and personal injury claims can be prevented by exercising risk management techniques. If you follow loss control recommendations, applicable landlord/tenant laws, and industry best practices, it would be hard for a reasonable person to find that you breached a duty.
On the other hand, recklessly refusing to follow the measures above could lead to big actual punitive damages. For example, according to Nahon, Saharovich & Trotz, a jury awarded $12 million to a man who was injured when an apartment staircase collapsed. The lawsuit claimed the owner was negligent in maintaining the premises, and the award included $6 million in actual damages and $6 million in punitive damages.
How General Liability Insurance Can Help (Coverage A)
Coverage A of your general liability insurance policy protects you against bodily injury and property claims related to alleged negligence on your part. These acts may involve omission (a failure to do something you have a duty to do) or commission (doing something that involves negligence). For example, if you fail to fix a broken step or shovel snow from the walkways, you could be accused of negligent omission.
If you are sued, your insurance policy has a duty to defend you. Your coverage will also cover any resulting damages up to your policy limits and according to your policy’s terms and exclusions.
To prevail, your tenant will have to prove that you breached a duty. Apartment owners must have a clear understanding of what their duties to their tenants are. Once you know your duties, you can take steps to make sure you don’t breach them.
Punitive damages may be getting increasingly expensive due to a phenomenon called social inflation. You may want to consider increasing your general liability limits by adding an excess or umbrella policy to your insurance portfolio, especially if punitive damages are insurable or not excludable in your state.
Liability Scenario #2: Wrongful Eviction, Wrongful Entry, or Defamation
Wrongful eviction claims are a hot topic right now due to the COVID-19 pandemic. Apartment owners eager to evict tenants formerly protected by federal and state eviction moratoriums must recognize that desperate tenants may take desperate measures to avoid eviction. In many cases, these tenants have fallen on challenging times. They may accuse you of self-help eviction if you sidestep the legal eviction process and take matters into your own hands, or they may file an uninhabitability claim with a government entity and then accuse you of retaliatory eviction. Tenants may also be inclined to accuse you of wrongful entry, invasion of private occupancy, and libel, slander or defamation of character.
Most wrongful entry claims arise when apartment staff fails to provide tenants with advance notice while conducting routine maintenance. While you may be concerned that a tenant facing eviction may damage your property, subjecting them to frequent inspections could prompt a self-help eviction claim based on harassment. Your legal adviser may advise that it’s best to treat all tenants the same absent emergency entry authorized by lease terms.
Apartment owners can also be exposed to libel, slander, and defamation of character claims against property managers and staff. These claims are less common because they are costly to litigate and difficult to prove, but they are still possible. For example, if former tenants find out that a manager is bad-mouthing them during reference checks, they may decide to sue for defamation.
This is one reason apartment managers are generally encouraged to keep it professional when responding to reference checks. Some risk managers suggest making it a policy not to give information out on past tenants without their permission.
How General Liability Insurance Can Help (Coverage B)
Coverage B of your standard general liability policy provides coverage for personal injury claims, up to the specified limits and according to the policy’s terms and conditions. Again, it’s important to know your policy terms and limits, and to check your policies and procedures to ensure that you’re acting in accordance with your state’s laws.
Liability Scenario #3: Medical Expenses
Imagine these common scenarios … A prospective tenant trips on a broken step leading to the office. A resident slips on snow that was not cleared from the sidewalk. A child falls on the community playground equipment.
When your tenants or other visitors suffer bodily injury on your property, they may ask you to pay for their medical expenses.
How General Liability Insurance Can Help (Coverage C)
To discourage lawsuits, general liability insurance carriers will usually pay a certain amount for medical expenses due to accidents such as trips and falls and those involving community amenities such as exercise rooms, pools, playgrounds and sporting courts—athletic activities excluded. Carriers usually pay medical expenses regardless of fault to avoid discussions of negligence.
Risk Management To-Dos
To minimize the potential for lawsuits, take the following steps:
- Take advantage of your insurer’s loss control resources. Loss control representatives can inspect your property and identify hazards that may lead to premises liability claims. They can also alert you to emerging litigation trends.
- Have an attorney review your lease agreements and liability waivers for legal sufficiency. Some waivers are not worth the paper they are printed on. Only an attorney can give you adequate legal advice.
- Review your general liability insurance policy regularly. Despite your best efforts, claims are possible, and some may be unfounded. Insurance is the last line of defense, but it must be sufficient. Make sure your limits are high enough and that you understand your policy’s terms and conditions.
- Know what’s not covered. Be aware that most general liability policies contain common exclusions, such as liquor liability and employer’s liability. Also, general liability should not be confused with professional liability. Professional liability protects directors and officers from errors and omissions while general liability provides coverage for claims that are not related to professional acts.