As long-time tenant rights lawyers, our firm has sued 1,000s of landlords, and in most of those cases, the landlords have had to pay significant sums out of their own pockets because they did not have the right landlord-tenant insurance. Not all landlord insurance policies are created equal. Landlords need to make sure they have the right coverage in place when lawsuits hit. Don’t be caught bare!
Good and Bad Landlord Insurance Policies
In general, there are three types of landlord policies. Here are the policies worst to best.
Bodily Injury and Property Damage Only Policy. Typically purchased by a new mom-and-pop landlord who does not know any better, a policy that covers bodily injury and property damage will leave a landlord paying significant cash out of pocket. This type of policy only covers physical injury to a tenant, like slip and fall, or physical damage to personal property, like fire damage to a tenant’s personal property. But, landlords get sued for a lot more than just bodily injury and property damage. Tenant lawyers sue for wrongful eviction, trespass, emotional distress, habitability, moving costs, return of rent, loss of the value of a rental unit, statutory damages, and attorney fees and costs, among other things.
Personal Injury Policy. At minimum, landlords need to make sure that their insurance policies cover personal injury, which is broader than bodily injury. Personal injury policies will cover claims even when there is no physical bodily injury and no physical property damage. These types of policies will cover tenant claims of emotional distress arising from repair issues, a wrongful eviction, constructive eviction, or a trespass. Sometimes these policies will cover statutory damages and attorney fees and costs payable to the tenant. It is often easy to add a landlord rider, or amendment, to a bodily injury only policy to get the broader personal injury coverage.
Commercial General Liability Policy. Typically purchased by landlords with multi-unit properties, the commercial general liability policy, or CGL, has the broadest coverage for tenant claims. CGL policies will typically cover bodily injury and personally injury. Most good CGL policies will cover statutory damages and attorney fees and costs. Almost all CGL polices will cover wrongful eviction, trespass, emotional distress, habitability, moving costs, return of rent, and loss of the value of a rental unit.
Secret Exclusions that Insurance Companies Don’t Want Landlords to Know About
Be on the lookout for the following dangerous exclusions in landlord insurance policies.
Attorney Fees and costs. Lawsuits by tenants almost always allow for recovery of attorney fees incurred by the tenant against the landlord. Landlord policies often have specific exclusions that state that the insurance company will not pay for attorney fees and costs on behalf of the landlord, which leaves the landlord to pay for these costs out of pocket. Attorney fees and costs can exceed $350,000 for cases that go to trial. Look for a landlord policy that requires the insurance company to pay the fees incurred by the tenant.
Statutory Damages. Tenants often bring claims that require landlords to pay statutory damages. Almost all rent-control ordinances mandate the award of statutory damages, as do state law claims such as the retaliatory acts statute and habitability statute. Civil Code §§ 1942.4& 1942.5. Some policies have specific exclusions for statutory damages. Look for policies that do not exclude statutory damages. Statutory damages are distinct from punitive or exemplary damages. Kelly v. Yee, 213 Cal. App. 3d 336 (1989). As such, a landlord policy that states that an exclusion for punitive and/or exemplary damages likely still covers statutory damages.
Habitability Damages. Some landlord policies actually exclude tenant claims for repair issues. These policies are absolute garbage. Do not pay for a landlord insurance policy that excludes repair claims. It begs the question: what the heck is the landlord even paying for when purchasing this type of insurance? With that said, nearly all policies will exclude claims for mold, lead and asbestos. Landlords will be hard pressed to find policies that cover these types of environmental claims.
Happy hunting! Buyer beware!