Property Management Liability Protections

By on November 7, 2018

Property managers wear many different hats in the course of their jobs. In addition to overseeing the maintenance, security and overall welfare of the properties they manage, at times they may also function as leasing agents, real estate agents, appraisers, consultants or construction managers. To do so, they must be knowledgeable and up to date on zoning regulations, tenant laws, tax information and property values. In addition, they are responsible for making sure lease agreements, purchase and sale agreements, and work orders are complete, accurate and submitted to the proper authorities (when necessary).

Why Buy Property Management Liability Insurance?

Due to the wide array of duties and responsibilities they have and the tight deadlines they operate under, even the most thorough and meticulous property manager is bound to make an error. Whether it’s an error of commission, such as entering the wrong information into a purchase agreement, or an error of omission, such as failing to disclose known pollutants, the result is often the same—a lawsuit.

Without the right type of insurance, the cost of defending a lawsuit can be financially devastating for a property management company. Property managers often mistakenly believe their General Commercial Liability policies will protect them from lawsuits stemming from a negligent act, error or omission, but a typical General Liability policy only covers bodily injury, property damage, personal injury and advertising injury claims.

Standard Errors and Omissions or any other Professional Liability issues are not covered by a General Commercial Liability(GCL) policy. Property management consultants and companies who have General Liability without Professional Liability (Errors & Omissions) coverage are taking a serious risk . To protect themselves from claims such as negligence, misrepresentation, inaccurate advice, and violation of good faith and fair dealing, property managers must instead turn to Property Management Professional Liability Insurance.

While the insurance needs of property management companies are in many ways similar to other businesses – property, liability, work comp, group health – property managers may also want to protect themselves from claims such as negligence, discrimination, and misrepresentation, including but not limited to:

  • Tenant Discrimination Insurance – Tenant discrimination is not covered by general liability policies. By adding tenant discrimination insurance coverage, property managers are covered when current, prospective or former tenants allegations of wrongful discrimination.
  • Habitational Insurance –  Many apartments, multi-unit dwellings or condominium claims are catastrophic in nature and coverage can be expensive and hard to secure.
  • Errors and Omissions Insurance – E & O policies protect professional property managers against liability claims stemming from a variety of client/tenant financial losses, including negligence and failure to perform.
  • Builders Risk Insurance – Many property managers make the mistake of having the contractor purchase builders risk insurance. Property managers may wish to buy coverage themselves, because the policy owner has control over the direction on any claim settlement and receives the claim checks from the insurance adjuster.

What is Property Management Professional Liability Insurance?

Property Management Professional Liability Insurance (also known as Property Manager Errors & Omissions Insurance, or Property Management E&O) is a supplementary liability insurance designed to safeguard a business against a catastrophic loss in the event of a lawsuit due to a negligent act, error or omission, slander, libel and breach of contract by the property manager or someone in his or her employment. The policy covers the cost of legal defense, but typically do not provide coverage for non-financial losses or for intentional or dishonest acts.

Property Management Professional Liability Insurance policies generally have both a claim limit and an annual limit, which is based on the policyholder’s exposure. The claim limit is the maximum amount that will be paid for any single event, and the annual limit is the maximum that will be paid in any one year. Typical limits range from $250,000/$500,000 to $2,000,000/$4,000,000 and differ depending on the individual business.

Find A Professional Property Management Insurance Specialist

You may be a commercial property manager who manages office buildings, strip malls or main street properties, or a habitational property manager who is responsible for apartments and single family homes. In either case, you will need the appropriate insurance for ALL the properties you manage.

Keeping track of multiple projects and policy expiration dates to ensure adequate limits and proper coverage can be extremely overwhelming.  The right kind of E&O policy can protect both the property management firm and subcontractors even if the problem occurs months after the initial consultation.

That’s why it is important to have an experienced insurance specialist to help you obtain comprehensive, cost-effective property management insurance coverage – tailored to your business’s unique needs and the needs of each property. Work with your broker to implement a comprehensive service plan to formally review each of the covered properties, and regularly monitor activity to control and prevent claims.

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