PM company-additionally insured

6 Replies

Hi everyone,

I'm in the process of hiring a property management company for the first time. In their contract they require that I add them as additionally insured on my Insurance policy. Is this pretty standard practice or something I should be concerned with?

Thanks
Lance

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We have the same requirement. It protects the PM for liability because sadly, not all landlords are honest and conscientious. Plus we can track if a landlord neglects to insure. We also require HOA change of address so we pay the dues, but more importantly, we get any violation notices directly from the HOA. We're here to alleviate stress, not create it. These are steps that let us be better PMs and helps to assure the landlords are also taking care of business (they hired a professional for a reason).

Don't you just love uninformed comments like "the PM should have their own insurance"?

Every property manager on Earth (if they know what they are doing) would require you to add them as additional insured. This is really meant to protect you as well. When a lawsuit is filed the attorney is going to sue everybody; the owner, the PM, etc.  If the PM is listed as additional insured then the insurance company must defend both of you in court on the liability claim. If you didn't have that in place what's going to happen? Well your PM will come to you seeking coverage for his defense expenses because I can assure you that in your mgmt agreement you have agreed to indemnify the PM against any claims. It costs you nothing to add an additional insured and you should absolutely do it.

A professional firm will have their own insurance to protect themselves on top of the additionally insured required from you.  Being additionally insured helps them protect you and act on your behalf if needed.  It does allow them to be an extra set of eyes if your coverage changes/lapses for any reason as @Robert Melcher touched on.  

Being additionally insured is also an extra layer of protection for the mgmt company if the landlord/property owner makes any poor decisions.   

@Lance H. @Robert Gilstrap nailed the main reason the PM wants to be added as an Additional Insured.  This is usually a requirement from the PM's insurance carrier. 

I would also like to add that it is good practice to be added as an Additional Insured on the PM's policy.  This way you will be notified if any of their insurance coverage's lapse.  If they have Care Custody and Control of your property, but no insurance, you could open yourself up to range of claims that are not coverered on your Lanlord policy, such as Work Comp and Discrimination claims. 

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