Talk in greater detail about what insurance should be added when buying landlord insurance, specifically the one that covers mistakes a landlord could make unintentionally. 

We have said that being a tenants’ attorney can be more lucrative than being a personal injury attorney, and we have seen a proliferation of lawsuits against landlords, so getting wrongful eviction coverage is certainly prudent.

As a full disclaimer, we are not insurance professionals. We wear many hats but we normally refer our clients to independent insurance agents who can shop for the right coverage. We can, however, from 40,00 feet, outline some considerations.

Is the property protected by homeowners or commercial insurance?

Buildings with five or more units are deemed to be commercial property for the purposes of insurance coverage and with that comes wrongful eviction coverage. The problem we see is some miscommunication between the owner and the insurance provider. The left hand doesn’t know what the right hand is doing. Small, mom-and-pop landlords with four or fewer units might not realize that they are left unprotected for wrongful eviction coverage. Only when there are five or more units is a commercial policy necessitated.

It is this exposed, vulnerable group with four or fewer units that should reach out to an insurance agent to evaluate what safeguards they have in place. We are speaking to owners of rented single-family homes, condos, duplexes, triplexes, and quadplexes. Given this disconnect, owners should look at their policies with a fine tooth comb to determine what is covered, and what is not.

 

Coverage is no excuse for bad conduct

We caution owners that wrongful eviction policies are not a license to engage in wrongful evictions. Generally speaking, many personal injury policies dictate that illegal activities by the landlord will not be covered. We have seen some egregious acts by landlords to constructively evict the tenant through harassment, such as shutting off utilities, hounding the tenant at all hours, imposing improper rent increases, making threats, and the like. With this type of behavior, landlords should not get a false sense of bravado and believe that they are shielded from liability.

 

Be aware of treble damages and attorneys' fees

Another point to keep in mind is punitive damages, especially in light of anti-harassment ordinances in the Bay Area. When a housing provider is sued, the landlord may be on the hook for treble damages and the legal bills of the tenant. So, if the tenant is awarded $80,000, the landlord could, conceivably, be obligated to pay much more, plus attorneys’ fees, which can be substantial. The wrongful eviction policy may pay the $80K, but not the punitive damages and attorneys’ costs of the plaintiff.

This is very scary stuff, making it vital that you follow best landlording practices so that you don’t have to respond to litigation.

 

Insurance hard to come by nowadays

As we noted in an earlier article, risk-averse insurance companies are leaving California in droves and housing providers are finding it increasingly difficult to protect their investments. We recommend that you reach out to an independent insurance agency to shop for the best policy that meets your individualized needs and if you would like references, contact our office.

 

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