Property Managers Can Reduce Their Risk Exposure With the Right Endorsements
If you are a property manager, you may be just as liable in a claim situation as the owner of the building you manage. Making sure you obtain documentation from your client (owner) to reduce your risk exposure is the best preventative measure for most situations. Claims will often be filed naming any entity who has been involved directly or indirectly in a transaction. Don’t get caught in a claim. This real-world scenario shows how easily a claim could have been prevented if the right documentation had been obtained.
A property manager has a client who purchases distressed properties and renovates them to rent as single-family homes. The rental agreement states the client (owner) will provide all maintenance during the rental period. Unfortunately, tenants are constantly complaining to the property manager about the general lack of maintenance. The property management agreement with the client (owner) indicates the property manager will be added as an additional insured to the owner’s liability policy by endorsement. The property manager fails to request the endorsement be added to the agreement.
The client (owner) AND the property manager receive a letter from a tenant’s counsel informing them the current tenant and their family have been exposed to mold. The letter claims that the failure to repair leaks from the HVAC system accumulated water intrusion which caused the mold. Failure to also remediate the resulting mold lead to the tenant’s demand letter. The tenant is seeking treatment for respiratory illnesses which may be permanent and includes allergy shots costing a total of $25,000.
The property manager’s general liability policy does not include pollution (mold) coverage. The client’s (owner’s) policy does have coverage for mold claims, but no endorsement had been obtained listing the property manager as an additional insured.
The client (owner) receives indemnity and defense. However, the property manager has no coverage and must pay the cost to defend the subsequent civil actions filed by the tenant.
This exposure could have been avoided in two ways. First and foremost, property managers should make sure their general liability or E&O policies include bodily injury, mold, and pollution coverages. Second, they should also obtain additional insured endorsements (with bodily injury, mold, and pollution coverages) under their client’s (owner’s) policy.
Preventing a claim in the first place is part of a comprehensive risk management strategy. For more information about E&O coverage and other risk management topics, visit pearlinsurance.com.This article was produced in conjunction with AXA XL and is not to be taken as legal advice.