Lawsuit time! A reminder about risk management for your STR
Collin HaysBusiness Member
Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votesLawsuit time! A reminder about risk management for your STR
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Michael BaumPro Member
Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votesThis doesn't sound like negligence to me. If the man was very overweight then I don't see how it is negligent. Unless the stair was rotten, stairs aren't up to code, stairs are not correctly built.
But, Anyone can sue anyone else for any reason at anytime in the USA.
49 Replies
- Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes3y
Quote from @Account Closed:
Does anyone know of any insurance agents that specialize in STRs that you can tag into this conversation?
I know my area requires $500K of liability insurance to cover issues like this but based on the conversation it sounds like this may not always apply as you would expect. This makes me wonder if there are any ways to mitigate this risk by (for example) thoroughly documenting the condition of your property and your efforts to maintain health and safety features?In Tennessee, we recommend Southpoint Risk. They are not an insurer, but an agency representing several insurers. They are experts in the STR space.
Mitigating your risk includes buying quality insurance and doing as you say, keeping up with your property and documenting your efforts.
- Real Estate Agent · Nashville, TN · Member since 2015 · 2k+ posts · 2k+ votes3y
I mean here's the thing...
This can happen. Was it negligence...maybe, maybe not. This is going to be hard to prove in my opinion. If it's so obvious the stairs had rot from top to bottom, then maybe. If the stairs had rot underneath and there was no visible damage by the naked eye, then is that negligence?
So many variables here.
Insurance doesn't "do everything they can to not pay". They investigate and make their best effort to put the cost on a company and not the individual.
I have had two claims- fire damage and hail damage. Both times insurance did an investigation into the product - electrical plug that caught fire and the quality of room install/shingles. They never even considered or mentioned putting the cost on me.More than likely what will happen here is that they are going to get an injury lawyer, file a claim, the insurance company will do their investigation and ultimately settle out of court for 5x the cost of gross medical expenses.
- Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes3y
Quote from @Luka Milicevic:
I mean here's the thing...
This can happen. Was it negligence...maybe, maybe not. This is going to be hard to prove in my opinion. If it's so obvious the stairs had rot from top to bottom, then maybe. If the stairs had rot underneath and there was no visible damage by the naked eye, then is that negligence?
So many variables here.
Insurance doesn't "do everything they can to not pay". They investigate and make their best effort to put the cost on a company and not the individual.
I have had two claims- fire damage and hail damage. Both times insurance did an investigation into the product - electrical plug that caught fire and the quality of room install/shingles. They never even considered or mentioned putting the cost on me.More than likely what will happen here is that they are going to get an injury lawyer, file a claim, the insurance company will do their investigation and ultimately settle out of court for 5x the cost of gross medical expenses.
Big distinction here: Fire and hail claims are not going to involve a question of negligence. Those are not liability claims. 99.9 percent of guest injury claims will be liability claims, and negligence is at the crux of every one of those claims. The primary question of the insurer will be "negligence" versus "gross negligence". If an insurer decides it was gross negligence, they can elect not to indemnify the property owner. Read your policy. We have endured several liability claims over the last 18 years, so I speak from experience.
- Real Estate Agent · Nashville, TN · Member since 2015 · 2k+ posts · 2k+ votes3y
- Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes3y
Quote from @Luka Milicevic:
Luka, we are a property manager. I also own properties, myself, but I have never (yet) had a claim against one of my own (although my day is coming). I believe we have had 6 claims against property owners dating back to 2005. I don't remember all of the details, but none went to trial. All were settled and paid by insurance companies, three of those our own insurance paid. As a property manager, we are always a defendant, because we are supposed to be "minding and managing" the property. Of course, we do that and can prove that up, but we are a defendant nonetheless.There is a common misnomer that an LLC shields an owner from negligence or gross negligence. Normally that is not the case. There is no quick and dirty way to skirt liability. It's part of business ownership.
- Real Estate Investor · Dallas, TX · Member since 2016 · 20 posts · 19 votes3y
Quote from @John Underwood:
Quote from @Collin Hays:
This occurred on Sunday. Thankfully not at one of our properties, but one about three hundred yards away. A heavier gentleman was apparently walking up the stairs to his cabin, a step gave way and snapped, and his leg fell through. Due to his body weight, apparently the next step gave away, so he was essentially stuck in the staircase, unable to extricate himself. His wife called 9-1-1, and the fire department had to come and release him. He was taken to the hospital. The report is that there were no broken bones, but lacerations on his leg and the sides of his torso from the wood.
What will become of this? Who knows, but I am sure that demand letters and lawsuits will be arriving for the homeowner soon.
Today, take a moment to stop fussing about how much you are/aren't making off of your STR, and focus on risk management of your property. A gross negligence case could bring you down.
Absolutely!
Be proactive in your upkeep and repairs, don't wait for a complaint to address needed maintenance.
This means if you remotely manage, you or a professional should be checking the property above and beyond what the cleaners have to say.
On VRBO, we rented a large, expensive house for a family gathering. I saw the property had just sold last March. It was gorgeous but needed fixes. If the owner doesn't get out there and check on it, I can see that the PM company won't do anything other than randomly send unqualified maintenance men to respond to issues; many times only putting a bandaid on it. You MUST be willing to occasionally travel to your properties or send someone who is deeply invested in the property like you are - not your own PM. Put it in your budget!!!
- Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes3y
Quote from @Carrie Young:
Quote from @John Underwood:
Quote from @Collin Hays:
This occurred on Sunday. Thankfully not at one of our properties, but one about three hundred yards away. A heavier gentleman was apparently walking up the stairs to his cabin, a step gave way and snapped, and his leg fell through. Due to his body weight, apparently the next step gave away, so he was essentially stuck in the staircase, unable to extricate himself. His wife called 9-1-1, and the fire department had to come and release him. He was taken to the hospital. The report is that there were no broken bones, but lacerations on his leg and the sides of his torso from the wood.
What will become of this? Who knows, but I am sure that demand letters and lawsuits will be arriving for the homeowner soon.
Today, take a moment to stop fussing about how much you are/aren't making off of your STR, and focus on risk management of your property. A gross negligence case could bring you down.
Absolutely!
Be proactive in your upkeep and repairs, don't wait for a complaint to address needed maintenance.
This means if you remotely manage, you or a professional should be checking the property above and beyond what the cleaners have to say.
On VRBO, we rented a large, expensive house for a family gathering. I saw the property had just sold last March. It was gorgeous but needed fixes. If the owner doesn't get out there and check on it, I can see that the PM company won't do anything other than randomly send unqualified maintenance men to respond to issues; many times only putting a bandaid on it. You MUST be willing to occasionally travel to your properties or send someone who is deeply invested in the property like you are - not your own PM. Put it in your budget!!!
A Property Manager that fails to keep a property up has a great deal of liability of their own in the event of a claim: They are standing in for the property owner, and the property owner is somewhat shielded from the claim. The Property Manager is a defendant 100 percent of the time in liability claims.
This is why covering your bases as a self manager is so important. If the insurance company decides that you are are just counting your money and letting everything go, they could walk away from your claim.
- 3yMichael BaumPro MemberOlympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
I am out at our house at least 5x a year checking on condition and seeing what needs to be dealt with. It is 7 hours from us but an easy drive and I like going there.
Our next place will be much farther more than likely so I will have to get a handy person or company on retainer to do the walk around looking for problems.
I am completely fastidious on maintenance of the deck, deck stairs, furnace, A/C and water heater. Railings and on and on. Keeping things copacetic is a main priority.
@Collin Hays is really on the money here.
- Attorney · Jacksonville, NC · Member since 2016 · 7 posts · 3 votes3y
Renters insurance won't save you and neither will an umbrella policy. You need a sophisticated asset protection scheme.
Renters insurance, umbrella policy, LLCs, Asset Management partnership, and potentially a trust in the event of the proverbial 8mil doomsday mold lawsuit.
You can't eliminate 100% of the risk, but there are legal avenues available to you to eliminate much of it.
- Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes3y
Quote from @Account Closed:
Renters insurance won't save you and neither will an umbrella policy. You need a sophisticated asset protection scheme.
Renters insurance, umbrella policy, LLCs, Asset Management partnership, and potentially a trust in the event of the proverbial 8mil doomsday mold lawsuit.
You can't eliminate 100% of the risk, but there are legal avenues available to you to eliminate much of it.
Your best shield is to look after your property. "Legal avenues" are for lawyers. Keep your stairs in good shape.
- Attorney · Jacksonville, NC · Member since 2016 · 7 posts · 3 votes3y
Quote from @Collin Hays:
Quote from @Account Closed:
Renters insurance won't save you and neither will an umbrella policy. You need a sophisticated asset protection scheme.
Renters insurance, umbrella policy, LLCs, Asset Management partnership, and potentially a trust in the event of the proverbial 8mil doomsday mold lawsuit.
You can't eliminate 100% of the risk, but there are legal avenues available to you to eliminate much of it.
Your best shield is to look after your property. "Legal avenues" are for lawyers. Keep your stairs in good shape.
Sorry, Collin. I'll have to agree to disagree with you there.
Plaintiff's lawyers use legal avenues too. We live in the most litigious country in the world, partly because of the contingency fee approach.
Use legal protection if its available to you. At least find an asset protection attorney and discuss your options.
- Lender · Washington DC · Member since 2015 · 2k+ posts · 2k+ votes3y
@Luka Milicevic @Account Closed Structuring the title in an LLC and another entity will not save an owner who is aware of a danger and fails to immediately remedy the problem. Gross negligence sticks on the owner's back. It is EASY to uncover who the owner person is behind ANY veil of title. The attorney subpoenas: bank records, title changes, emails, property manager, your VRBO/Airbnb account, inspections, and contracts. If there was a mention about the stairs bending or dry rot and owner ignored the problem, the court won't care about the layer of asset protection- it goes on the back, purse, and credit of the owner until settled. It doesn't matter if the man weighed 250 pounds or 350, the owner has a responsibility to provide a high level of safety. Owner is running a hotel and personal liability insurance may not be enough coverage.
If owner has an umbrella policy does it state it covers him/her from negligence- no never does it say this.
Keep a log of your inspections of your subject. Use some date stamp method to show this is happening often. Cell phone camera images are date stamped and useful if no health or safety code violations show up. If you have a property manager have them send you the documentation quarterly. Repair complaints.
- Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes3y
Quote from @Caroline Gerardo:
@Luka Milicevic @Account Closed Structuring the title in an LLC and another entity will not save an owner who is aware of a danger and fails to immediately remedy the problem. Gross negligence sticks on the owner's back. It is EASY to uncover who the owner person is behind ANY veil of title. The attorney subpoenas: bank records, title changes, emails, property manager, your VRBO/Airbnb account, inspections, and contracts. If there was a mention about the stairs bending or dry rot and owner ignored the problem, the court won't care about the layer of asset protection- it goes on the back, purse, and credit of the owner until settled. It doesn't matter if the man weighed 250 pounds or 350, the owner has a responsibility to provide a high level of safety. Owner is running a hotel and personal liability insurance may not be enough coverage.
If owner has an umbrella policy does it state it covers him/her from negligence- no never does it say this.
Keep a log of your inspections of your subject. Use some date stamp method to show this is happening often. Cell phone camera images are date stamped and useful if no health or safety code violations show up. If you have a property manager have them send you the documentation quarterly. Repair complaints.
winner winner chicken dinner!
- Attorney · Jacksonville, NC · Member since 2016 · 7 posts · 3 votes3yYes, a US court can pierce the corporate veil of the LLC and issue a judgement and come after your assets. However, the real question is - are you collectible? A foreign trust domesticated in the US makes it VERY difficult to collect, which means the case will likely settle for cents on the dollar if the plaintiff's attorney even thinks its worth pursuing at all. The IRS has tried multiple times in the Cook Islands and all they do is lose.
Quote from @Collin Hays:
Quote from @Caroline Gerardo:
@Luka Milicevic @Account Closed Structuring the title in an LLC and another entity will not save an owner who is aware of a danger and fails to immediately remedy the problem. Gross negligence sticks on the owner's back. It is EASY to uncover who the owner person is behind ANY veil of title. The attorney subpoenas: bank records, title changes, emails, property manager, your VRBO/Airbnb account, inspections, and contracts. If there was a mention about the stairs bending or dry rot and owner ignored the problem, the court won't care about the layer of asset protection- it goes on the back, purse, and credit of the owner until settled. It doesn't matter if the man weighed 250 pounds or 350, the owner has a responsibility to provide a high level of safety. Owner is running a hotel and personal liability insurance may not be enough coverage.
If owner has an umbrella policy does it state it covers him/her from negligence- no never does it say this.
Keep a log of your inspections of your subject. Use some date stamp method to show this is happening often. Cell phone camera images are date stamped and useful if no health or safety code violations show up. If you have a property manager have them send you the documentation quarterly. Repair complaints.
winner winner chicken dinner!
- Attorney · Jacksonville, NC · Member since 2016 · 7 posts · 3 votes3y
Brian Bradley did an extensive run down about this topic on BP# 598.
- Lender · Washington DC · Member since 2015 · 2k+ posts · 2k+ votes3y
@Account Closed why would an honest person go through so much effort to put their money offshore?
- Attorney · Jacksonville, NC · Member since 2016 · 7 posts · 3 votes3y
Quote from @Caroline Gerardo:
@Account Closed why would an honest person go through so much effort to put their money offshore?
Because dishonest people may sue you - especially if they know you have millions in assets.
- Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes3y
Quote from @Account Closed:
Yes, a US court can pierce the corporate veil of the LLC and issue a judgement and come after your assets. However, the real question is - are you collectible? A foreign trust domesticated in the US makes it VERY difficult to collect, which means the case will likely settle for cents on the dollar if the plaintiff's attorney even thinks its worth pursuing at all. The IRS has tried multiple times in the Cook Islands and all they do is lose.Quote from @Collin Hays:
Quote from @Caroline Gerardo:
@Luka Milicevic @Account Closed Structuring the title in an LLC and another entity will not save an owner who is aware of a danger and fails to immediately remedy the problem. Gross negligence sticks on the owner's back. It is EASY to uncover who the owner person is behind ANY veil of title. The attorney subpoenas: bank records, title changes, emails, property manager, your VRBO/Airbnb account, inspections, and contracts. If there was a mention about the stairs bending or dry rot and owner ignored the problem, the court won't care about the layer of asset protection- it goes on the back, purse, and credit of the owner until settled. It doesn't matter if the man weighed 250 pounds or 350, the owner has a responsibility to provide a high level of safety. Owner is running a hotel and personal liability insurance may not be enough coverage.
If owner has an umbrella policy does it state it covers him/her from negligence- no never does it say this.
Keep a log of your inspections of your subject. Use some date stamp method to show this is happening often. Cell phone camera images are date stamped and useful if no health or safety code violations show up. If you have a property manager have them send you the documentation quarterly. Repair complaints.
winner winner chicken dinner!
If you own a vacation rental, you've probably got some assets...
- Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes3y
Now that we've allowed this thread to denigrate into legalese and lawyer self promotion....
Look after your property. If something needs fixing, fix it.
- 3yRonald RohdePro MemberAttorney · Dallas, TX · Member since 2016 · 5k+ posts · 2k+ votes
Quote from @Collin Hays:
Now that we've allowed this thread to denigrate into legalese and lawyer self promotion....
Look after your property. If something needs fixing, fix it.
I thought that was your goal of the post!
Scary stuff, glad no one was seriously hurt though.
- Member since 2018 · 23 posts · 9 votes3y
Thank you for sharing Collin! This is something I need to keep in mind. I'm sure the owner had some kind of insurance and, if there is a lawsuit where the plaintiff wins, hopefully it will cover all or most the costs.
- Realtor · Albuquerque, NM · Member since 2014 · 109 posts · 79 votes3y
A couple of thoughts about risk mitigation. First, make sure you notify your insurance company that you are using your house as a short term rental. Sounds obvious but some don't do this. Second, get a lot of medical and liability insurance. Third, carry an umbrella polciy with $3 million of liability or more. You may want to hold your rental in a LLC.
Risk mitigation is a must. You work hard to get where you are and can lose it fast!
I am not an isurance sales person, but you have to find ways to protect yourself!
- Real Estate Agent · Colorado | stan.store/JamesCarlson · Member since 2014 · 2k+ posts · 2k+ votes3y
Great thread here. Most of our STR/Airbnb investor clients here in Colorado follow our advice, but we occasionally get potential buyers who want to get "creative." This manifests in several ways:
-- They want to try to do a short-term rental in a city that doesn't allow investment STRs. Like Denver here doesn't allow it, but several adjacent cities do. (I'm sure an insurance company would love to deny a liability claim based on the fact that you're operating against local laws.)
-- Or they want to skimp on insurance because it's a few thousand bucks more per year than traditional homeowners' insurance. (Again, if you lie to your insurance company about what their product is covering, then they'll deny any claim, so what good is the insurance at all?)
-- In general, I see people trying to cut cost corners with Airbnb. They don't buy chic furniture. They do their own cell-phone photos that aren't great. They fight with a guest over $100. On and on and on.
If you're buying a multi-hundred-thousand dollar asset, do not try to save a few hundred dollars. You'll end up losing way more in the end.
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