Joe,I am sure you already read it, but the answer to your question in this thread was made in this thread (for those who would like to read it)http://www.biggerpockets.com/forums/48/topics/31818-llc-s-vs-umbrella-policyAlso, as Greg stated, the LLC is an "inside liability protection" meaning that you personally are protected from the entity, but the entity is not protected from you.In other words, if you were to drive drunk and kill someone, they (their family) could sue both you and all your holdings, including your assets held inside your entities, but if your tenant falls and sues, they can only sue the entity (unless you were found to be negligent)

My lease specifically states that tenants will be responsible for the cost of plumbing charges if due to their negligence.

I bought a business from an S Corp owner sued by a customer for negligence for over $2 million, both the S Corp and he was personally sued.

Before you know it, you'll be testing the paint for lead, the water for arsenic, the air for mold spores, pulling up the subfloor to determine the radon seepage, raking the yard looking for poisonous snakes and camped out with a flashlight and a machete in the yard in the dead of night warding off the threat of a zombie apocalypse while they chat up your other tenants into a class action suit to address your "negligence."

You can do everything right and still get sued, which is unavoidable sometimes, but it's better to be unknowingly negligent than knowingly fraudulent.

It's not intentional acts that tend to get you, its the unforeseen, not expected incidents that you don't plan for, and negligence. 

Then I think you could go ahead and get a FL RE lawyer to pursue legal action to recover the expenses - and maybe a little more due to negligence.

Carrying costs are negligible, slightly cheaper on option #1.

While bidding for a home, I need to take into account the rehab costs and my knowledge in that area is negligible.

You are negligent in your tenant training.No household furniture permitted.I would suggest you keep up on your quarterly inspections as she is likely a slob and you will need to police the entire unit.