Real Estate Investor · New York, NY · Member since 2012 · 210 posts · 15 votes
This topic has come up in past forums and on Google searches, but there seems to not be a definitive answer.
Basically, a PM wants to be listed as "additional insured" on a property. I assume this is so he can look to my insurance first if there ever is a problem (assuming that he carries his own insurance).
Other PMs have asked for this coverage as well. My current PM does not ask for this.
How "hard" a line should I put here? If PM refuses to budge, do I need to find a new one?
Investor · El Dorado Hills, CA · Member since 2012 · 1k+ posts · 1k+ votes
13y
Kelli, Being named as an additional insured and a loss payee are two different things. AI status only relates to liability. A mortgagee clause and/or loss payee endorsement relate to the property and a PM doesn't have a insurable interest so they would not be included in any sort of property claim settlement.
Investor · El Dorado Hills, CA · Member since 2012 · 1k+ posts · 1k+ votes
13y
It is pretty common. You are the first named insured so it really does not affect you. The PM is looking for defense coverage if everybody is named in a lawsuit. Your policy will not cover them for anything done in the scope of their duties so, in my opinion, it is not worth fighting over.
This is common for a property manager to be listed as additionally insured. Besides he is the one who has his neck on the line dealing with the tenants.
Real Estate Investor · New York, NY · Member since 2012 · 210 posts · 15 votes
13y
Thank you for the responses. its interesting because a google search has many saying they would never do this.. but on BiggerPockets it seems like a non-issue...
Real Estate Broker · Orange County, CA · Member since 2013 · 11 posts · 3 votes
13y
One really big con to putting your PM on your insurance is that if there is a loss on the property, the insurance company will include them AND your mortgage company in any payouts. I had property in hurricane Katrina and it was hard enough just working with the mortgage company to get my properties repaired, I can't imagine having a PM in the mix.
I understand they want to be covered for liability, but I think they should have their own liability policy. If they have employees, the should also have workers comp.
Investor · El Dorado Hills, CA · Member since 2012 · 1k+ posts · 1k+ votes
13y
Kelli, Being named as an additional insured and a loss payee are two different things. AI status only relates to liability. A mortgagee clause and/or loss payee endorsement relate to the property and a PM doesn't have a insurable interest so they would not be included in any sort of property claim settlement.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
13y
Welcome to BP Kelli, totally agree.
Agree with Joe.
I would not allow it. Your policy won't cover them if they are named in any action. I doubt there is a sufficient insurable interest in title under a PM agreement and their professional relationship and activities would not be covered as that falls under professional liability coverage, not a casualty policy.
Being named as a loss payee puts them in a position to make demands, like who gets the work for repairs and an open door to kickbacks. It may be common, not a good idea IMO. :)
Property Manager · Big Bear Lake, CA · Member since 2013 · 585 posts · 330 votes
13y
There may be some confusion as to exactly what additional insured means. Here it is:
Adding another entity as an additional insured on your general liability insurance policy serves to protect that additional party in the event of negligence on your part as the primary policyholder, or “named insured.” It is not the intent of your policy to pick up the liability of another party when you had nothing to do with a claim or occurrence.
Insurance Agent · Oaks, PA · Member since 2012 · 34 posts · 10 votes
13y
While we have rarely done it for our clients, I don't foresee much of an issue adding the PM as an additional insured as long as your carrier is agreeable to it. There is relatively limited exposure to a situation where they would actually be provided protection under your policy.
I think the larger issue here is whether your PM has their own coverage in place. As the property owner, you should be requesting that you are added as an additional insured to the PM's policies and provided a certificate of insurance. You will also want to confirm that they are carrying both general liability and professional liability coverage with limits satisfactory to you.
Just as they want to be provided protection for your negligence, you should be insisting on the same from them.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
13y
Ann Bellamy, yes there is. Kelli posed the statement and there is a difference noted by Joe.
Anyone can be named as a loss payee, could be an agent, your cousin to take care of a loss under a POA, your lender who has a collateral interest.
An additional insured must have an insurable interest in the property, the basis for all insurance is that you can't insure something you don't have a significant financial interest in. Insurance is only to indemnify the insured for the financial loss suffered, not intrinsic values. If your pest control company has a contract to provide services monthly and your house blew away, the pest control company can't claim a financial loss for services that can't be provided any longer, and that maybe covered under loss of business coverage. Same for a PM. This would not be under the casualty coverage. But, if the pest control company sued to enforce the contract on the property, you may have coverage under the liability portion.
However, if there is a loss the insurance company doesn't just pick one insured among several insureds to cut a check to, all those insured will be named on that payment for them to be indemnified.
It depends on the policy and the ownership of the policy of having additional or contingent insureds or beneficiaries. So, if you are an insured you have a financial interest, any loss paid will be disbursed in all their names.
So, if an additional insured or any loss payee is on the check for a significant loss suffered and one decides they won't endorse the check except under certain circumstances you have a problem.
While it is possible for a company to insure a PM, say as a rider, such would not be common. I would not doubt that at some point some insurance company did cover a PM, could be the PM also had a claim against the owner and a company agreed to cover the PM in some action as well to avoid other issues. It's possible. Such may have given some RE Broker the idea to require being named on the policy as an additional insured, starting the trend among PMs.
And, when any insured has multiple coverages or over lapping coverage, the insurance companies may sort out the rights of subrogation which can further delay the payment of claims, as the PM should have coverage and that would fall to the primary insured.. It's not a good idea to seek other forms of coverage for the same risk.
At least, this is how it went in my insurance agency, since these concepts have been around for over a hundred years, I suspect they have remained in place. :)
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
13y
Originally posted by Michelle L:
There may be some confusion as to exactly what additional insured means. Here it is:
Adding another entity as an additional insured on your general liability insurance policy serves to protect that additional party in the event of negligence on your part as the primary policyholder, or “named insured.” It is not the intent of your policy to pick up the liability of another party when you had nothing to do with a claim or occurrence.
My PM is covered due to my negligence by making a claim, not as insuring additional insured by and between themselves. That type of coverage is found in Officers and Directors Liability policies.
Now, generally, but any company can come up with anything the law will allow as a product. :)
Real Estate Investor · New York, NY · Member since 2012 · 210 posts · 15 votes
13y
What Farmers is saying, is they will add the person as an "additional interest", but not a "additional insured".
Further the PM claims they are additional insured on all other units managed. What is interesting is the Texas Association of Realtors property management form, has a section regarding adding the PM as additional insured.
In any case there seems to be 4 defined terms:
- Co-insured
- Additional Insured
- Additional Interest
- Loss Payee
Real Estate Investor · New York, NY · Member since 2012 · 210 posts · 15 votes
13y
Farmer's wouldn't budge. Two prospective PMs ultimately agreed to make it a non-issue. One had Farmers and himself had to call Farmers and then realize they wouldn't budget.
Investor · Minneapolis, MN · Member since 2014 · 79 posts · 17 votes
12y
I am trying to get my PM as additional insured on my condo unit. My insurance agent won't do it.
"Now that I looked at your policy, all we have is personal property on
this rented condo. You need to contact your association who has the
coverage on the building and have them add the info of property manager onto
the policy as additional insured."
When I asked the association about it, they said that they don't do that, it would have to be on the condo's policy.
What is going on here? My account with the property management is put on hold until I fix this insurance issue.
Detroit, MI · Member since 2009 · 114 posts · 40 votes
12y
Most insurance companies now are not allowing PM's to be listed as additional insured. One issue is that a property owner manages properties for multiple owners and there could easily be some confusion as to who is liable when a property manager is visiting multiple properties. Also the insurance companies don't like to add property managers because they don't underwrite the PM, so if a PM is not removing snow or dealing with fallen branches or whatever they are obligated to do, then the insurance company can be forced to pay for that exposure. It is also hard to identify a bad PM if there are not being underwritten which creates a very large unknown risk for the carrier. Rates and coverages are based on risks that actuaries can evaluate and calculate.
First off, a good PM should have their own insurance. They should also be aware of the property conditions and notify you of any potential liability issues they believe is present to protect themselves and the property owner. They may want to be listed as an additional interest so they are notified if the owners policy cancels and then the PM is not exposed to managing a property without insurance which increases the PM's risk.
This scenario is kind of like your landscaper asking you to buy insurance listing them in case there is an issue of liability while they are cutting your lawn, it doesn't happen. The PM is held accountable to their duties and responsibilities and they should work with property owners that are going to take responsibility to protect the public from potential exposures and will follow the advise of the PM so the risk is minimized for both parties.
Lastly there are a few companies that will list a PM as an additional insured but they seem to be a dying breed (probably due to claims experience).
I am trying to get my PM as additional insured on my condo unit. My insurance agent won't do it.
"Now that I looked at your policy, all we have is personal property on
this rented condo. You need to contact your association who has the
coverage on the building and have them add the info of property manager onto
the policy as additional insured."
When I asked the association about it, they said that they don't do that, it would have to be on the condo's policy.
What is going on here? My account with the property management is put on hold until I fix this insurance issue.
Thanks.
If the PM were to be listed as an additional insured, they would be listed on your policy's liability. It sounds like you don't have liability insurance at all, that could be one of your issues. Condo associations don't offer liability for the individual owners, its only for the association.
Investor · Minneapolis, MN · Member since 2014 · 79 posts · 17 votes
12y
Thanks @Donald Stevens , I appreciate the input. Very educational. Unfortunately, my PM is holding rent payments until I add them as additional insured. But my insurance company is saying they won't add them. Crap.
Thanks @Donald Stevens , I appreciate the input. Very educational. Unfortunately, my PM is holding rent payments until I add them as additional insured. But my insurance company is saying they won't add them. Crap.
That's a good question for bigger pockets. Can a PM hold rent payments from an owner for not being listed as an additional insured? Will the rent payments still be in the account when the issue gets resolved? Why were they accepting tenants and rent payments in the first place (acting as a PM ) without being listed as an additional insured? I would think they would have to decline being your property manager and the rents would have to be paid direct to you since you would in effect be the PM for your own properties, correct? By collecting rent payments they are currently on the hook for whatever liability they are trying to avoid. Weird or possibly even sinister. Be careful and get some legal advice asap. IMHO
Rochester, NY · Member since 2014 · 138 posts · 45 votes
12y
As a property manager myself, I am pretty surprised they are holding the rent until the AI is resolved. I would talk to an attorney. And I certainly hope that the rent will be there when this is resolved-they should be placing the money into Erik's (private-to avoid commingling of funds) escrow account.