Liabilitu Insurance won’t cover if I perform background checks!

[Benjamin Dutil]

HI BiggerPockets community. I’m finally launching my property management and handyman business. To protect myself I have requested quotes for general liability insurance. As the Agent asked me questions about the tasks I would be performing the question of running background checks and credit checks came up. Of course I said I would be performing those duties not only to make my life easier as a manager but to protect the property owner. However I was forced to sign a release stating that I would not perform the criminal credit background checks. I inquired why this was an issue and was told that if a murderer or similar got through the background checks and I rented to them and then they committed said crime that I would be held responsible for that! What are your thoughts on this and has anybody else experienced this while seeking to in sure their business?

[John Mocker]

Benjamin,

I'm an Agent who writes commercial Insurance including Professional Liability (aka Errors & Ommission or E&O) and General Liability. From the alternate name for the professional coverage you can see what it is intended to cover for Professionals, doing something wrong or failing to something that you should have. E&O is normally for an economic loss. General Liability is for Bodily Injury and Property damage you cause by your operations. Your Handyman business is more likely to have a general liability claim and the Property management business in more likely to have a E&O claim. You are going to need both General & Professional Liability. Of the two, the Professional is the more difficult coverage to get. There may be some companies that will package the two types of coverage on one policy but the more common situation is for there to be separate policies. If possible, I generally try to write both policies with the same Insurance company in case the claim overlaps the two policies.

I regarding your question about whether or not to do back round checks.  If you are property manager and you do not do back round checks would you have more liability than if you did do the check but something did not show up.  That is a question for an Attorney that knows that area of the law.  If the Attorney confirms that you are worse off by not doing the checks you need to see if there are any other companies that will write you.