Tenant Liability Waiver Program

Multifamily property and casualty rates are sustainably high and continue to rise, and carriers are also forcing very high deductibles on renewals.  The need to mitigate claims is now more important than ever. While multifamily property owners will always have a need to carry their own insurance to cover unexpected, uncontrollable losses, there are ways to help with resident caused losses. 

Traditionally in multifamily, leases have mandated that a resident carry a renter’s insurance policy (HO-4) with language adding the management company/property owner as additional insured to offset resident-caused losses, which is covered in the liability portion of the renters policy. The site staff then have to execute a process to enforce this requirement: Who manages the insurance certificates? Does the resident have the correct coverage mandated? Did the resident let the policy lapse?  Did the resident renew the policy?  Does the site staff have the time to work this in? How do you track all of this to ensure everyone is doing what they are supposed to?   

The intent is good, but time and experiences have revealed major flaws. For example, a recent analysis of a client management company showed the company had 85% participation for occupied units, leaving 15% with no coverage.  Guess which of those 2 groups is more likely to cause damage resulting in a claim?  Also, when there is a claim, it requires the resident to file a claim on their policy, through their agent (who might not prioritize a renters policy claim), and when the claim check does come – it will include the resident since they are the named insured. 

This is part of what proves the point about the renter’s insurance mandate model being obsolete. Renter’s insurance was meant to cover the resident’s personal property and provide personal liability coverage. A resident should absolutely carry the amount of insurance they think they personally need for their own personal property and liability. The intent was not for it to be used to extend coverage to a management company/property. There’s a better way. 

A Liability Waiver Program

A Liability Waiver Program waives the resident’s responsibility to pay resident-caused claims due to certain perils, such as fire, smoke, explosion, accidental water, or sewer backup. The Liability Waiver program steps up to pay claims for these losses. Policy limits vary, but are typically $100,000, $200,000, or $300,000.  Although this can include a sub-limit to protect some of the resident’s personal property, having their own HO-4 renters policy is encouraged to make sure they have enough coverage for their belongings and for their personal liability not exclusive to damaging the apartment building property. 

RLL (Renters Legal Liability) was the first in the market to create and prove why the Liability Waiver is the better choice for multifamily. With RLL, the named insured on the policy is in the management company/property entity name, which means that any claims checks are made out only to them.  A Liability Waiver program should be primary over a property’s P&C policy, meaning claims up to the policy limit do not hit your P&C loss runs. This is HUGE to help control renewals and minimize cost increases due to loss history. Other than taking care of the most common claims seen in multifamily, this allows the owner/manager to use this coverage to pay for the increased deductibles for claims in which a tenant is responsible, which itself can be a huge savings. 

Tracking everything

Any Liability Waiver program should be fully integrated with all multifamily management software platforms, thus reducing any extra site staff data entry or time spent …. If you’re moving a resident in, you are enrolling them.  The resident can be enrolled via lease addendum, giving you the ability to add all new and all renewal residents, attaining 100% participation for occupied units. 

There has been a notable shift in the resident-caused damage space, and it’s easy to see why a Liability Waiver is the easy choice to make when reviewing and building loss mitigation programs for multifamily assets.

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