Property Managers Professional Liability Insurance – Understanding Key Issues, by Andrew J. Kelly, RPLU
opens IMAGE file Property managers face a wide range of exposures that must be addressed correctly when placing their professional liability insurance. An experienced professional liability insurance broker will recognize that the professional liability policy for a property manager will reflect their dual responsibility to both the property owner and tenant. Placing a policy for a property manager begins with recognizing and addressing issues that are unique to their profession as good faith custodians of the assets these professionals manage each day.
The first exclusion I look for when I receive a quote from one of my insurance companies is the failure to maintain insurance exclusion. Failure to maintain insurance is an exposure that must be addressed whenever the property manager is involved in any way with making the insurance placement. Most property managers are in charge of making sure that the proper insurance is in force on each one of their properties. If a property manager fails to renew a policy, or allows it to lapse due to nonpayment, it exposes the property an uncovered loss. While it is true that a separate insurance agent can be involved in placing the insurance for each property, the presence of an insurance agent does not absolve the property manager of the applicable standard of care in this area.
A major portion of property manager’s professional services involves overseeing the physical maintenance of the property itself to ensure it is safe for its tenants. A fairly big point of contention for claims adjusters that see property management claims is the grey area of trying to decide if a bodily injury claim is the result of negligent professional services. Depending on how the claim is brought, a GL policy could easily exclude a claim if the claim adjuster attributes the loss to the property manager’s professional services. Coverage for contingent bodily injury and property damage within the professional liability policy becomes critical to supplement the GL policy for these potentially costly grey area claims when the GL policy will not respond due to a professional services exclusion.
Some insurance companies that write the professional liability insurance for property managers have a limitation in the coverage with respect to owned properties. The exclusion can vary to apply to any properties that are owned, or a more favorable wording that only places a specific ownership percentage restriction in the coverage that the property must be under for coverage to apply. The applicant should advise in writing upfront whether they manage any owned properties. If owned properties are a part of the applicant’s portfolio, an up to date schedule that has the ownership percentage for each property should be provided for the broker so that the implications of each insurance company policy form y with respect to owned properties can be properly addressed.
Enhancements like failure to disclose pollutants, personal injury violations of the fair housing act, and tenant discrimination are details that might seem trivial, but can make the big difference if a lawsuit is filed against the insured. These additional coverages are especially important because they effective protect against unintentional violations of statutes designed to protect tenants against unfair treatment. Personal injury coverage for libel or slander claims is also important since the potential for lawsuits in this area is always possible. Procuring additional insured coverage for any commonly owned asset manager, insurance agent, or real estate agent is possible, but is always easier to obtain when the needs of the client are addressed in the beginning of the process.
An uncovered property management claim can be devastating to a business if the professional liability policy is not tailored to meet the needs of insured. Marketing a property manager submission requires an insurance professional that understands the markets, exposures, and proper solutions that are key to correctly covering the class of business.
Andrew J.Kelly, RPLU
Alexander J. Wayne & Associates, Inc.
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