Require Tenants Make a Relocation Expenses Claim?

Question

Hi Folks

I have a duplex in CA and the lease requires the tenants carry a renter's policy. Recently there were some maintenance issues that required they vacate the premises and stay in a hotel. I've agreed in principle to reimburse them for the relocation expenses but I want to require that they first make a claim through their insurance, and I'll cover what remains.

Does anyone know if this is legal or even the "regular" order? Could they claim that they're entitled to reimbursement immediately and in full from me?  It doesn't seem right that I'd have to just take it in good faith that they'll submit the claim on my behalf after they've already been made whole.

Additionally, I've prorated the rent/utilities for the full number of days they were out of the premises.

Bo Bond · Answer

From an insurance point of view, if the damage/issue was caused by a "covered cause of loss" (fire, water damage, lightning, sewer backup, wind, hail, etc.), then the tenant should have protection under their own renters policy to rent a hotel.  This is usually "not" covered under the owner/landlord policy for that rental home.  The "loss of use" (aka additional living expenses) coverage falls to the policy of the person who's having to move out and relocate for a certain amount of time.  In this case, your tenant.

However, if this damage/issue is "not" caused by a "covered cause of loss" and is just typical maintenance, then I'm 99.9% sure neither you nor the tenant will have insurance protection.  If this is the case, then I'd suggest you use your best business judgement in this situation, and any advice of others that have been involved in similar situations. Hope this helps!

Bo Bond · Answer

Greg, your are correct in that the carrier may likely consider this to be an issue of normal wear and tear, and decline the claim since wear and tear is a standard exclusion under most policies.  Yes, you could file a claim, but may just send you down a road of meetings, paperwork, reports, etc. only to be officially denied in the end.  Assuming this has all been repaired, you have to consider that now there's nothing for an insurance adjuster to review.  You might have pictures and some details, but nothing first hand for the adjuster to review.  In the end, if there's no real indication that a covered cause of loss caused the gas line to leak, then I'd just move on and chalk this up to an unfortunate maintenance issue.

As for your second scenario, your neighbor paying you out of pocket or filing a liability claim under their own personal auto policy would be ideal so you aren't paying the price in any way.  It would be unethical to collect from your neighbor and then file a claim with your carrier for damages. I would never recommend you doing this for multiple reasons.  Carriers are also cracking down on issues like this and would consider this a type of insurance fraud.  Filing a claim when you don't need to would also trigger your claims history, and depending on your location and carrier may increase your rates.

Greg Hoffmann · Answer

@Bo Bond Something tells me you're in the industry!

Thanks for the replies, all. It was not an elective repair it was a gas leak that turned into having to replace the entire gas line. As far as if it's a covered loss, it's an old house so they'll likely say it was just wear and tear. But wouldn't it still be worth it to submit a claim?As far as the hypothetical neighbor driving into my garage door, I would have originally thought the same way, that a claim should be processed first. How does it work if the neighbor reimburses me 100% out of pocket and then I submit a claim and get extra reimbursement on top of that?

Colleen F. · Answer

@Greg Hoffmann I wouldn't prorate rent on top of paying for a hotel.  You are paying for lodging twice.  If it is  an elective repair renters insurance doesn't cover.

Christopher Smith · Answer

Does your insurance reimburse you for your tenant's temporary living costs? Mine does and I've availed myself of it during repair of past water casualty damages.

Joe Splitrock · Answer

I would just refund the days they were unable to occupy, unless the nature of maintenance was elective and not required. As a tenant, I would not want to place a rental insurance claim for something the landlord would or should reimburse me for. What if your neighbor drove their car into your garage door and told you, "file an insurance claim and I will reimburse you the difference?" Obviously there is more detail to the story which may change my response.

Require Tenants Make a Relocation Expenses Claim?

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