If only one tenant has insurance and there's an accident caused by another tenant's negligence, things can get messy.

I am not an attorney but I would think the burden of proof will be on her and it would be difficult to prove you were negligent in this case.

But I guess a lot of you seem to think that extra cost is negligible if I am refinancing anyway.

In fact, some states require the borrower to cancel impounds in writing before the lenders/servicer is allowed to cancel so, if they cancelled and you didn't instruct them to, ok maybe they are negligent.

However, as previously stated the appreciation is negligible.

Your story sounds to have a fair level of negligence, and depending on your contract, oh-yeah, there could be accountability there. 

The lender has no duty to the 2nd borrower and vice versa and in fact, the lender may be negligent to regulatory agencies, examiners, investors, the U.S.

How specific can you get in your lease when it comes to tenants responsibility for repairs of things to the house related to negligence, ie flushing sanitary products down toilets, appliances, hoa fines related to negligence of caring for the yard or following hoa rules etc? 

e.g. if we add a clause to the lease contract stating they will be liable for all charges due to their purposeful destruction or negligence, is this legally binding? 

If I decided to scrap the whole idea and just get a big umbrella policy with the exception of gross negligence are there really very many situations where the umbrella policy wouldn't hold up?