By: Chris Majerle, PCAM
You might think paying for insurance is a cost of business that your property manager should absorb. There are insurances that managers should carry, but in this post, we’re talking about liability insurance, particularly for what might happen at your property.
Let’s start by looking at some of the claims that a property manager might need to file. If someone is visiting the office, say to pay rent, and falls down the stairs, that’s not your problem. The manager should have a general liability policy to include incidents that occur either in the office or, for that matter, in their personal or business vehicle in conjunction with a business-related activity. So, the property manager should carry a commercial general liability policy and a business use of vehicle auto policy.
There may come a time that the property manager causes a grave error that results in the loss of money. One example might be that they delve into sales where their expertise lies in rentals. They advise you that you property is worth $100,000, but it’s really worth $250,000. You sell for $100,000 on their advice. This may constitute an error and the manager’s errors and omissions insurance would be the first line of that claim.
The property manager has employees and must have a workers compensation policy to protect against costs relative to an employee injury claim. But, here’s a good example of where we are headed. Suppose you have an apartment building and you have an office staff. One of those people is injured on the job. Would you expect the manager to cover that loss? Of course not; this claim would be filed against your workers compensation policy.
Likewise, there is a fire in your rental property and your tenant is injured, or worse. You may be sued and your manager will be dragged into it. This is not the fault of the property manager AND the property manager’s general liability policy should not be charged with this claim unless it’s through some negligence that the manager caused this fire. For the manager to be covered at multiple locations, they would have to purchase a policy for each location. Then, that cost would be relative only to your property; the manager’s insurance costs would rise proportionately to the number of locations managed. This would require that the cost be passed-on to the owner, anyway.
Most Rental Dwelling Policies, policies issued for residential rental property owners, either automatically cover the property manager or can have the manager added at no additional cost. If you have tried and cannot, there is a good chance you have the wrong kind of insurance and that would result in the policy not paying when there was a claim. If you are sure you have a Rental Dwelling Policy and they will not add the manager without cost, change insurers. Most will. So, in the end, why would you not place the manager on your policy at no cost and, instead, cause them to incur added cost for covering your property; a cost they would have to pass-on to you? A competent management company will require that your insurance provider issue a certificate annually to document coverage of the management firm. Again, that is usually free with just a phone call to your agent.