Protection from a Hold Harmless / Indemnity Clause in a Property Management Agreement

[Steve Nelson]

I own rental property that I have managed for several years.   I want to hire a management company to manage it for me.  The only problem is the management company insists on a hold harmless / indemnity clause in the agreement that limits their liability and shifts most of the liability to me.  I want to go with this company, but I do worry about the liability.  What can I do to reduce or eliminate my risk?  I have a landord policy from a good insurance company that covers me for the first million and I also have an umbrella policy that covers me for an additional one million.   I added the property management company to this policy.   Does my insurance policies protect from everything that could happen?  Is there additional insurance I should purchase?  Would you sign a property management agreement with a company that insisted on a hold harmless / indemnity clause in the agreement that shirt most or all of the liabilities to you?   Please let me know.  Thank you for your input.   

[Bill B.]

I agree the language is probably standard and not much you can do about it other than use a different company if you have a backup that doesn’t include the language, maybe they’ll strike it. 

On the other hand I don’t like the example of the tenant filing a random lawsuit and that not being the PM’s fault. They are the one that placed the tenant and certainly should know more about on going conditions at the rental than the owner. They are certainly more responsible than the owner they are asking to protect them.  

In fact. I think I could argue the other way. As the owner who didn’t choose the tenant and has no idea of the ongoing Avery conditions of the property they are managing. Maybe I should be held harmless by them?

Does anyone have any idea how this works out in real life? I assume of a real injury/loss occurs everybody gets sued. Is there anyway the courts say the PM doesn’t have to pay if they caused say a natural gas explosion killing several people? Can they simply say we have this signed document from the owner saying not our fault so bite me. Sorry for your loss.  I assume it would be no defense for a fair housing violation they committed. 

Has anyone on BP experienced the consequences as an owner or a PM that can chime in? In almost 30 years I’ve never heard of it being an issue, I assume it would have to be a big loss and then the insurance companies would just fight it out?