@Eli Benali please check with an attorney, but why are you taking it out of a protected environment and placing it into your names? 

Most leases will contain something like this:If Lessee fails to pay Rent, or otherwise Defaults under this Lease, Lessor may use, apply or retain all or any portion of said Security Deposit for the payment of any amount due Lessor or to reimburse or compensate Lessor for any liability, expense, loss or damage which Lessor may suffer or incur by reason thereof.I would not expect to give it back in this case, because essentially they have broken the agreement, but again it depends on the language of the lease you've had them signed whether they are "entitled" to it or not.

@Mason Blake if the insurance lapses, the mortgage company will put on insurance that protects their investment but doesn't protect you from liability.

What, if anything, can I do to protect myself from the nightmarish scenarios I hear about landlording in California?

.), then the tenant should have protection under their own renters policy to rent a hotel. 

Simply warning them is not enough to protect you from liability.

This is even more important if you plan to work multiple fix-&-flips at a time.Errors and Omissions is important to protect you when you fail to manage your LLC professionally. 

We have a 12 page management contract that we've added our real experiences to over the years, with the intent of protecting both us AND the landlord.

And not sure what state she is in but in Texas a homestead is protected. 

It was once said that I had suffered the trials of the damned.