Wrongful eviction insurance highly recommended for Bay Area landlords

Whoever said that we live in a litigious society must have had Bay Area landlords and tenants in mind.

Renters who feel aggrieved have an abundance of free legal representation and advocacy groups to turn to for guidance and so landlords can easily be sued for any grievance, regardless of the merits of the case.

This can be a costly endeavor for rental property owners who must pay their own way. For this reason, we strongly recommend getting a wrongful eviction insurance policy, as a typical homeowners policy will not pick up the tab when a tenant sues the property owner.

Before we talk more about wrongful eviction coverage, some background is in order in terms of what is at stake.

 

Landlords walking a tightrope

It is rather easy to sue the landlord, and the impact can be devastating. Under San Francisco’s Rent Ordinance, for instance, the tenant can sue for three times the amount of actual compensatory damages, which may include emotional damages with punitive damages tacked on.

Liability is oftentimes incurred not because of intentional misconduct, but for ignorance of the law. Commonly, the landlord is sued not because he or she acted maliciously but inadvertently failed to comply with a provision of a local rent ordinance. Treble and punitive damages may also be based solely on comments made to a tenant, perhaps an ominous warning that the tenant may be evicted that is construed as harassment.

This is why we have always urged landlords to not engage in animated conversations, lower the temperature in the rental relationship, stay abreast of the law, and tether themselves to our firm to avoid any costly missteps.

 

"Constructive" vs. "actual" eviction

Constructive eviction lawsuits have proliferated throughout the Bay Area. These types of actions do not claim that the landlord threw the tenant out of the building or locked the doors to prevent the tenant from gaining entry. Instead, they allege that the landlord has interfered with or distributed the tenant's possession of the premises. For example, the landlord fails to fix a leaky roof that makes the rental unit uninhabitable.

We can find no better case to explain constructive eviction than one dating back to 1938. In Giraud v. Milovich, the court said:

“It is often difficult to determine what acts will constitute an eviction. It is settled, however, that there need not be actual dispossession of the tenant from the leased premises. An eviction may be actual, as where there is a physical expulsion, or it may be constructive as where, though amounting to an eviction at law, the tenant is not deprived of actual occupancy. Any disturbance of a tenant’s possession by a landlord or by someone acting under his authority, whereby the premises are rendered unfit for occupancy for the purpose for which they are demised, or the tenant is deprived of the beneficial enjoyment of the premises, amounts to a constructive eviction.”

It is precisely this logic that has compelled us to remind landlords over and over again to keep the premises in habitable condition. Deplorable conditions cannot only be used as a defense in an unlawful detainer (eviction) action; it can also spawn a  costly lawsuit against the landlord.

 

What about insuring unwarranted units?

This is a grey area and amplifies the importance of seeking an insurance professional that understands the intricacies. We will not make any emphatic statements.

 

Policies will depend on a myriad of factors

First and foremost, how many units are in the building? For 1-4 units, the most likely insurance policy will be for personal injury. These policies will cover claims even when there is no bodily injury or property damage. Aside from wrongful eviction, emotional distress arising from repair issues, trespass, and constructive eviction claims fall under this category.

For buildings with 5 or more units, or for any “mixed-use” buildings that have a blend of residential and commercial, the landlord will have to purchase a commercial general liability policy or CGL. A good CGL policy will cover a broad range of tenant claims, including statutory damages and attorneys’ fees and costs.

We want you to look at the fine print in these policies and be wary of exclusions such as attorneys' fees and costs, statutory damages, and worst of all, denying coverage when habitability and repair issues arise out of the tenancy.

Take a hard, close look at your insurance coverage and keep in mind that nearly all policies will exclude claims for mold, lead, and asbestos.

 

Which carrier or agent to choose? 

With so many nuances involved, our foremost recommendation is to sit down with someone who is intimately familiar with writing policies that protect landlords. Talking to an insurance agent with no knowledge or experience in this specialized line of insurance is like talking to an attorney who knows nothing about landlord-tenant law.

Our strong preference is to reach out to an independent insurance agency that can shop around and find the right fit for your unique needs. Bornstein Law can refer you to trusted contacts in this space.

Previously, we recommended Farmers Insurance, but the company is now re-evaluating landlord’s insurance policies. This is not particularly uncommon, as updated risk assessments are conducted, for example, in an area that is prone to floods or fires.

 

Parting thoughts

We’ve always been amused by comical insurance ads that plaster the airwaves.

This author’s personal favorite is “Mr. Mayhem,” the face of Allstate (Dean Winters) who always gets a bad break. Whether experiencing an explosion when he ignites a grill, staying in a creepy roadside motel because he ran out of gas, being forced to change a tire in a torrential downpour, falling through windows when exercise bikes malfunction, or other events, catastrophe is always looming for Mr. Mayhem, who has superhuman resilience in not only surviving these calamitous events but in offering cool commentary.

The insurance business is one of odds and risks, and what we want to impart is that landlords in fact expose themselves to substantial risk. It is real and not fear-mongering.

Landlords have a much greater chance of being sued by a tenant than getting hit by a meteor or opening a drawer to get sprawled by a leprechaun spitting cider. Bornstein Law can help you strategize to avoid or reduce such risks and protect against the impact when such events occur.