Property Management Liability Insurance
A property management company has an insurance policy to cover their operations. It will cover your company for any number of liability claims such as slip and falls, an employee stealing money or a discrimination case. Even if the case is frivolous and without merit, an important aspect of that policy is the “Duty to Defend.” The cost of defense gets expensive fast. Your carrier is obligated to defend you so long as the claim is not excluded in your insurance policy.
If you have maintenance staff that are employees of the Property Management company, there is a very good chance you have an exclusion on your liability policy for any property damage the maintenance staff does. How do you know if your policy has this exclusion? You’ll see it listed on the exclusions portion of your policy and you might also see it as an endorsement on your policy. It is usually called the Residential Property damage exclusion.
Hiring Independent Contractors
If you use independent contractors to perform any maintenance duties, you’ll want to use only insured maintenance staff. If the maintenance contractor is uninsured, the property maintenance company’s insurance will be on the hook for the damage, which they won’t cover. Ask your contractors to provide proof of insurance to reduce any chance of secondary liability. This is traditionally a good way to help you find good contractors to work with as well.
Example of a claim scenario in which this exclusion applies:
Imagine if your maintenance staff replaces a ceiling fan in an apartment building you manage, but don’t own. It’s installed improperly and causes a fire and that causes significant damage to the building. The insurance on the building will pay to repair the damage. That insurance company is going to try to subrogate with the person responsible for the damages. The maintenance worker is an employee of the Property Management company so the property management company is on the hook for paying the damages. With the property damage exclusion in place, there is no coverage and the Property Management company may have to pay for the damages out of their own pocket. Ask yourself, how much can my company afford to pay before it bankrupts the company?
In order to protect your company either subcontract all your maintenance with an insured company or purchase a second policy to cover your maintenance operations. Those policies are relatively cheap to get.
Your broker should be having these conversations with you. Reach out to an expert by filling out the short form below.
Article by Aaron Hennings
Aaron has been in the insurance industry since 2010. He specializes in helping businesses in the Construction, Habitational, and Manufacturing industries, but has experience working with businesses of all kinds.
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