After dealing with a plumbing leak in one apartment, a neighboring resident is claiming the leak caused damage to her costly furniture and is demanding reimbursement. My insurance is reviewing the claim, but where do my responsibilities begin and end in this situation?
This all-too-common scenario highlights yet another reason to always use the SFAA Residential Tenancy Agreement (RTA). Years ago, the lease drafting committee added clear and succinct language concerning risk of loss and the duty of every tenant to procure their own insurance policy.
Paragraph 46 of the RTA states as follows:
INSURANCE/RENTER’S INSURANCE: Generally, except under specific circumstances, OWNER IS NOT legally responsible for loss to the Tenant’s personal property, possessions or personal injury, and OWNER’S INSURANCE WILL NOT COVER such losses or damage. In addition, if damage to Owner’s property or an injury is caused by Tenant, Tenant’s guest(s), invitees, or child (children), Owner’s insurance company may have the right to attempt to recover from Tenant(s).
Tenant shall, at all times during the term at Tenant’s sole cost and expense obtain and maintain renter’s insurance on a policy form commonly known as HO-4 that includes at a minimum the following insurance coverage: (1) Personal Liability coverage of at least US $300,000.00 combined single limit per occurrence for Bodily Injury and Property Damage; (2) Replacement cost coverage for personal property plus twelve months Loss of Use coverage (also known as Additional Living Expense) coverage (3) the Premises listed above must be listed on the policy as the “insured premises” of the Tenant insured; (4) Owner is listed as a Certificate Holder and, as an additional insured; and (5) the carrier must provide thirty (30) days’ notice of cancellation or non-renewal to Owner, except for non-payment of premium for which ten (10) days’ notice shall be given. Tenant is responsible for any deductible under this policy.
Tenant must provide proof of such insurance to Owner at the inception of the tenancy. In addition, Tenant must provide to Owner proof of insurance on an annual basis. The failure to abide by this covenant shall constitute a material breach of this Agreement.
The parties agree that the requirements of this paragraph benefit both the Tenant and the Owner.
Thus, even if you do not mandate and enforce the procurement and renewal of tenant insurance policies, every resident should be on notice that property loss and other mishaps will not become the housing provider’s responsibility or otherwise covered by the owner’s insurance policies. And if you inherited older lease contracts that omitted this type of disclaimer, you may change the terms of the tenancy by imposing this language or something similar with a proper thirty-day notice. Every member should therefore check each rental agreement to make sure this disclosure is present; if not, consult with legal counsel to implement its insertion into all operative lease agreements.
Even with this language present, residents may still file a claim against you for negligence when accidents occur in the building that cause them to suffer a loss. Hence, always remember to maintain adequate building coverage that will, if necessary, protect you from any lawsuit or claims that a building resident might decide to pursue. SFAA has insurance-themed meetings every year where panelists implore the members to annually review and update their building insurance policies to ensure that most if not all potential tenant claims are covered. So please, before the new year, review and update your leases to include renter’s insurance language and meet with your insurance broker to confirm that you are adequately insured.