, or just taking some of their investment off the table (risk reduction), generating a partial taxable event to be used again operating loss carry forwards, etc. 

Get a $5k deductible and protect yourself against total loss.  

This loss is expected and not a problem.

Both my properties are cash flowing around $200 per month but as I mentioned I have only had them for a few months (will have them about 12 months by the time I am ready to purchase my next) and I am not sure if lenders would recognize that as income or actually count the mortgage payments as a loss in the debt column.Any advice or insight on this would be greatly appreciated. 

We figured we'd have to take her to small claims court or just eat the loss.

And you can't switch insurance companies because they all know as you will be required to give loss runs when you try to get new insurance. 

Below you'll find some of the information contained in the proposal.Property Coverage:Terms/Conditions: special Form: Excluding Flood/ EarthquakeReplacement Cost: Buildings & Personal Property - No coinsurance.Actual Loss Sustained: Loss of rents-extended business income for 90 days.Actual Cash Value: Applies to wind/hail claims on existing roof coverings over 15 years of age and older.Deductibles: $10,000: AOP per occurence$25,000: Per location, per occurence for wind/hail/ hurricane$10,000: Equipment breakdownNONE: Loss due to fire which emanates from a permanently attached cooking surface.Exclusions: Pollution & contamination, asbestos, earthquakeMold, mildew & fungusFlood is excluded - Earthquake is excluded.Wind/hurrica/hail/floodCosmetic damagesI just realized that it is too much information to write onto a forum post - it wouldn't make much sense.

You need to dump these people ASAP before this goes any further.They already got 50% of the profits when you took the real risk and they had fun with your money and now they want you to eat more losses paying her for shopping a few hours and the father for whatever he did?

Every tenant eventually moves so the costs will be exactly the same for each in time while not maximising rents will be a added ongoing loss from day one.

But if you can't refi or pay off that loan completely then it may also be a great way to loss the property.