Property management has different exposures, some of which are covered under an E&O policy and others under a general liability policy.
For instance, injuries to people or damage to property would generally fall under general liability insurance. Because most property managers are responsible for property maintenance, hiring vendors, and screening dogs, among other things, your need for general liability insurance is greater than a typical real estate brokerage. Property management claims can be grouped into two categories:
Property maintenance includes vendor selection. Are you considering multiple vendors? Are you finding out whether they are insured? And do they offer a prompt response and repair verification? Property maintenance claims will likely fall under general liability insurance.
Tenant screening and handling
Tenant screening and handling includes proper screening practices, collecting rent and deposits, and handling evictions. A property manager could be sued for renting to an unqualified renter, or when someone claims he was unfairly denied a rental property. Tenant screening and handling claims will likely fall under E&O insurance.
How property managers can reduce their risk
- Require all renters to carry at least $300,000 in liability insurance on their renter’s policy.
- Require landlords to carry at least $500,000 in liability on their dwelling policy.
- Some renter’s policies will allow the property manager to be added as an interested party, which means you would receive notice if the policy cancels.
- Secure multiple bids from insured vendors for maintenance and repairs.
- Use a uniform tenant-selection form and process to avoid discrimination claims.