Property managers of both residential and commercial buildings are becoming more susceptible to lawsuits and other types of claims. As a property manager, your job is to care for a property on behalf of its owner, and when things go wrong, you can – and will – be held responsible.
Property Managers Face Property Maintenance and Liability Risks
Property managers are ultimately responsible for finding and keeping tenants on someone else's property. In order to be successful, they must do the following:
- Negotiate, sign and enforce leases
- Collect rents
- Make repairs
- Conduct routine maintenance
- Ensure the safety of tenants and guests
All of these endeavors have inherent risk exposure.
Property and Liability Insurance Protects Property Managers
The biggest risks for property managers are related to maintenance and upkeep of a property and to liability claims related to negligence or contract performance. There are often questions about which party – the manager or the property owner – has the insurable interest on a building, but in general, property managers must carry commercial property insurance as well as several forms of business liability insurance.
- Commercial property insurance protects a property manager’s assets after a physical loss due to smoke, fire, wind, hailstorm, vandalism and other covered events. Property managers are generally responsible for keeping insurance coverage on the buildings they manage, but this depends on their responsibilities as outlined in the contract with the property owner.
- Business income insurance, or business interruption insurance, is usually included in a commercial property policy. This coverage protects your earnings if you cannot collect rents for a period of time (and lose income) as a result of some type of unexpected event (storm, fire, etc.). It allows you to earn income while repairs are made to the property until tenants can return.
- Commercial general liability policies provide coverage if you, your products, services or employees are found to have caused an injury or property damage to someone else. If a resident or visitor falls and is injured on a property you manage, general liability insurance provides coverage for claims against you. It covers medical costs for the injured party as well as any costs associated with your legal defense.
- Professional liability/errors and omissions (E&O) insurance offers coverage for lawsuits that arise from providing negligent or deficient professional services.
Property managers may want to consider a business owners policy (BOP), which is a bundled small business insurance policy that includes property coverage, liability coverage and business income insurance. The size of your business and a number of other factors will help you determine whether you qualify for or should purchase a business owners policy.
The Importance of Liability Coverage for Property Managers
One of the most important types of insurance that property managers must purchase is professional liability insurance, or errors and omissions coverage. There are numerous areas in which a property manager can be sued for lapses in professional responsibility:
- Failure to purchase appropriate property insurance, resulting in a loss for the property owner
- Wrongful or negligent evictions
- Discrimination claims (e.g., tenant claims some type of discrimination)
- Other claims of failure to perform professional duties according to your contract
Professional liability insurance covers your legal defense costs, settlements or judgments you are required to pay, court costs and attorney fees. Commercial general liability insurance does not provide coverage for any expenses related to professional liability claims or lawsuits.
Most E&O policies have specific coverage exclusions, depending on your profession. Typical exclusions include these:
- Criminal, fraudulent or malicious acts
- Bodily injury and property damage
- Workers’ compensation claims
- Punitive damages
Other Coverage to Consider
There are several other types of business insurance policies that property managers may want to consider depending on the size of the business and whether they have employees.
- Nonowned auto liability coverage should be purchased if you or your employees drive personal vehicles for business use. This coverage can be added to a business auto insurance policy or to your general liability policy.
- Workers’ compensation insurance is required for most businesses that have employees. It protects you and your employees from the costs of work-related injuries and illnesses.
- Group health, life and disability insurance and more can be offered to your employees in order to make your company a more attractive place to work.
- Employee dishonesty coverage is a form of crime insurance that protects the business owner from a financial loss that results from fraudulent acts committed by a single employee or even by a group of employees. You may not think that your employees would ever steal from you, but if they collect rents in cash or other forms of payment, the temptation is there. A basic employee dishonesty policy provides coverage for forgery, alteration, theft, unauthorized electronic funds transfers, credit card fraud, computer fraud, money order fraud and counterfeit fraud. And you can add endorsements for additional coverage.
Find the Best Insurance for Property Managers
Property managers face very specific and unique risks. You may be wondering how to find the best coverage for your specific business.
Your best bet is to enlist the help of an insurance professional who will get to know every aspect of your business and will help you assess your exposures. Working with a reputable, independent insurance agent in your area will give you access to highly rated insurance companies and numerous policy types and will ensure that you are getting the best coverage for your needs and budget.
Contact an Independent Insurance Agent today.