RISK & INSURANCE for Rental Property Owners & Managers

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1 RISK & INSURANCE for Rental Property Owners & Managers Kurt D. Kelley, J. D., President The Jaded Viewpoint of a Lawyer / Insurance Agent 1

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3 That s Life! Why insure? 3

4 Risk Transfer Have someone else take your business risk The Rule of Sequence of Returns Protection of other stakeholders (banks, landlords, owners, etc.) You are R-I-C-H (according to your customers) A note about customer relations Customer Relations 4

5 Customer Relations No confusing messages to customers Customer Relations No confusing messages to customers TOO Clever Ads Generate the Wrong Customers. 5

6 Be Careful with Misrepresentation Harsh Messages! 6

7 Bad decisions can lead to things going terribly wrong What could possibly go wrong? Disgruntled Clients more likely to Cause Problems 7

8 Storms Tornado - Lone Grove, OK Storms Greensburg Tornado Fire 8

9 Alcohol Related Issues Alcohol Related Issues Vandalism 9

10 Sewer Issues Theft Autos 10

11 Sexual Assaults Investigate Potential Business Partners What Rental Home Owners & Managers get sued for... 11

12 Slips and Falls $650,000 for fall off bad steps Plaintiff suffered from diabetes Broken leg resulted in amputation. Untrimmed trees Mowers throwing rocks 12

13 Utility problems $1,000,000 - Rental home tenants decided to heat the house with their oven. Four children and two adults suffered CO poisoning with resulting brain damage Fingers Dogs! $738,000 Manager corralled a stray dog and put it in a storage shed, left to call the dog catcher. Child went to look in shed and dog bit her in the face 13

14 Service Animals, Companion Animals, the ADA, and Fair Housing Standards The EEOC isn t your Confidante Drowning $2,000,000 two young boys, unknown guests of a tenant, scaled pool fences and drown in pool $1,000,000 drowning by young boy in pond 14

15 Smoke Detectors Negligent Security $20,000,000 manager failed to notify tenants of a recent rape, a 2 nd tenant raped thereafter, assailant unknown Utility Issues 15

16 Employment problems $300,000 Manager fired employee she claimed sexual discrimination and harassment Employment problems alleged improper terminations Golf Carts 16

17 Fires $850,000 Tenant dies in rental home fire Premises Defects Premises Defects 17

18 Discrimination Data Breach Target lost approximately 40,000,000 customer credit cards in a security breach due to hackers. Worker Injuries 18

19 Homeowners Insurance vs Commercial Insurance Extensions Homeowners Insurance may not allow naming an LLC, Corporation or Management Company as Named or Additional Insured. Homeowners Insurance usually offers Lower Limits & Personal Umbrella Liability policies exclude commercial risks. 19

20 COMMERCIAL INSURANCE has tougher and more experienced legal defense Rental home operations losses will increase your homeowners insurance premiums. HOMEOWNERS INSURANCE is cheaper if only a few rental homes. 20

21 Insurance Issues for Property Management Companies Named Insured vs Additonal Names Insureds Management Company Errors & Omissions Coverage 21

22 Claims by Property Owner against Property Manager Management Issues When to Report an Accident or Event 22

23 General Rule Immediately Exceptions: Small property damage claims, tiny or suspect injury claims Manage Contractors & Vendors 23

24 All should provide Certificate of Insurance verifying General Liability & Workers Comp Name you as Certificate Holder for low risk activities, Additional Named Insured for higher risk activities Signed, Dated Performance Agreement before Payment 24

25 Additional Risk Management Recommendations Use Maintenance Logs Smoke Detector Sign-Off Form 25

26 Dogs less than 30 pounds & no aggressive breeds NO Trampolines Kiddie Pools not left out 26

27 Arbitration clause in rental agreements Bad decisions can lead to things going terribly wrong Do all this and rest well! 27

28 RISK & INSURANCE for Rental Property Owners & Managers Kurt D. Kelley, J. D., President 28