Landlord Insurance -- When is it ever used beside a fire?

[Michael Wong]

This is a pretty broad question and I'm sure it depends on the type and level of insurance the landlord buys, but it may bring up a nice discussion, so when is landlord insurance used outside of a major fire or disaster?   We own several rentals and have paid our insurance like clockworks, but have never filed a claim.  So I wonder when and for what other landlords will consult their insurance company for?  Is it like car insurance, where if you make a claim, your premiums sky rockets?  When should a landlord use their insurance?  

[Frank Chin]

I've been land lording for nearly 40 years, and had to file a claim maybe twice. It's a broad question, so I'll give you my experiences.

Besides fire, you'll have tenants suing you for negligence, slips and falls, like not shoveling snow. Then there was a small tornado where the fence between my property and the neighbors got blown down, and had to repair it. 

To prevent your insurance from skyrocketing, it's true that you won't have big increases or cancellations if you limit filing claims, The way to do this is to convince your tenants to buy renters insurance. It'll generally cost the tenant $150/year, and if the tenant finds the urge to sue you, then he'll have to file a claim against his renter's insurance first. Only if his insurance finds he's not at fault will his insurance file claim under subrogation to your insurance.

We had some prior scraps with tenants. One tenant was burglarized and claimed a $1,500 loss due to our negligence, the lack of security in the building. He claimed that we didn't get after other tenants in locking the front door to the triplex, and his apartment had inadequate locks, contributing to he loss, a mink coat among other things. I spoke to my insurance agent and she advised against my filing a claim against my insurance for the reasons you cited, increased premiums for me. At the time, I didn't require renters insurance, and in New York City, I'm told I still can't require it. When the tenant withheld rent, we settled it with him for one month's rent, something line $1,000 at the time and didn't renew his lease.

Now, to put this in context, had landlord friends renting to tenants who had trouble paying rent, then got burglarized and had designer high heels worth several hundred dollars each stolen. A scam? The tenant we had did not look like the type to wear mink coats either.

Another time, I had in the lease requiring renter's insurance, my tenant claimed he got it, sent me proof via the certificate of insurance. Then a few months later, he left his windows open, went out, when a rain storm came, flooded his bedroom. When that happened, I told him to file the claim against is renter's insurance first. Problem? The wise guy cancelled it immediately after he sent me the proof. This time, the loss was to big for me not to file the claim as the floor boards were all warped. Additionally, we had a service to dry out and clean up the place, at a cost of several thousand dollars. This is the first time I learned there's remediation companies that handles this type of thing. The wise guy tenant then ask "what about damage to my stuff?". This time around, I'm smart enough to tell him the way it happened, it's his negligence, not mine which is what renters insurance is for, so I told him to stuff it, or I'll sue him, and evict him for violating his lease by not having renter's insurance. As it was a small claim, by insurance standards, my premiums did not go up.

Now, I've been told that to know about tenants cancellation of renter's insurance, is to have me, as the landlord added to his policy as an additional insured. There's been differing opinions whether this is all legal and proper, but I had a business where I rented space, and had to add my landlord in as additional insured, and on policy renewal, my landlord is also notified of my renewals, so he knows everything is on the up and up, so I'm all for it. So this is pretty standard practice.

In answer to your question, for rentals, landlord insurance is important and cover you in these cases. For instance, landlords are supposed to supply working carbon monoxide detectors around here. What happened if something went wrong and a tenant dies or got incapacitated for life. In that case, you'll need umbrella insurance because the tenant is not looking for you to waive a month's rent for negligence, but a few million. You're talking big time lawsuit.