Landlord "Loss of Use" liability?

Question

A friend of mine that owns one investment property recently warned me of the need to require tenants to have insurance due to the "loss of use" liability.

The main water line to his property recently burst, flooding the entire basement and leaving the property uninhabitable. Luckily his tenants have family they can stay with, but he did not require them to have insurance, therefore they had no loss of use protection.

Question:

Do you require your tenants to have insurance?

In your experience, if a tenant chooses to not carry renter's insurance, is there any liability on behalf of the landlord in a scenario such as this/similar scenario?

• Just assume the landlord had been keeping the property up and the loss of use was not due to negligence.

Thanks, Chris

Chris Stromdahl · Answer

@Dan Perrott @Curtis Bidwell

I called and spoke with my insurance company today.

I am choosing to not require tenants to have insurance but will insert language outlining where my coverage ends and their liability begins.

Thanks for your input.

Chris Stromdahl · Answer

@Curtis Bidwell

Thank you Curt. Between your response and the input from @Dan Perrott I have enough outside perspective on it to move forward in deciding how to handle this.

I will call my insurance company today.

Thanks, Chris

Curtis Bidwell · Answer

Hey, @Chris Stromdahl !  Here's a copy of my Rental Agreement as related to this issue:

23.RENTERS INSURANCE: Lessor shall not be liable for any loss of lessee’s property by fire or any other reason.Lessee agrees to carry insurance on their possessions with a reputable insurance company and to make no claim on landlord for any reason and to name "Your Company" as additional insured on their policy.

Apparently some states will not allow you to be named as additional insured, but we have never had an issue.  Usually the insurer will notify us of renewals or lapses when we are named.  I go into detail on this issue during my move-in orientation so they know that we won't cover any of their possessions for any reason.  It is my understanding that you would not have any liability even if you didn't state it in the contract.

Chris Stromdahl · Answer

@Dan Perrott

That does help, thank you. I would like to avoid requiring my tenants to obtain renter's insurance and this language indicates that I am requiring it by requesting proof of insurance to be rendered within one month's time.

I think it is the tenant's responsibility to insure themselves and to be accountable to themselves.

My concern is whether they choose to not purchase renter's insurance, is their any liability on me.

Dan Perrott · Answer

Here is the statement from the lease agreement found on BP.  Note that it identifies the tenant as being responsible for their insurance and if they do not purchase it, then they bear all the responsibility.  It is one way to protect your self as the land lord.

18. TENANT INSURANCE

No rights of storage are given by this agreement. LANDLORD will not be liable for any loss of Tenant’s property. TENANT hereby acknowledges this and agrees to make no such claims for any loses or damages against LANDLORD, his agents, or employees. TENANT agrees to purchase insurance at their own expense, sufficient to protect themselves and their property from fire, theft, burglary, breakage, electrical connections etc. They acknowledge that if they fail to procure such insurance it is their responsibility and they alone shall bear consequences.

The lease that I use has the following statement.  It covers all damages and loss regardless of cause - which does cover loss of use as well.

Insurance – Owners have obtained insurance to cover fire damage to the building itself and liability insurance to cover certain personal injuries occurring as a result of property defects or owner negligence. Owners’ insurance does not cover Tenants’ possessions or Tenants’ negligence. Tenants shall obtain a Tenants’ insurance policy to cover damage to or loss of their own possessions, as well as losses resulting from their negligence. Tenants agree to make no claim against the Owner for any loss or damage regardless of whatever cause of such loss. Tenants agree to show Owners evidence of such a policy within one month from the date of this Agreement. Initials verify that the Tenant understands this paragraph.

Hopefully the above examples will help.

The information provided is not legal advice and I am not a lawyer.