Property manager wants me to buy workers comp insurance

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Property manager wants me to buy workers comp insurance

Nicholas P.
Member since 2021 · 2 posts · 0 votes

I am working on closing on my first rental property in Florida. I've run all the numbers and everything seemed to be going well. The property management company I was going to be working with just sent me a contract that includes a provision that says I have to provide workers compensation insurance for their employees to do work on my property. It appears to be a major red flag to me and I'd like to negotiate to have them remove it or find another company. But I wanted to do a quick sanity check. Do your property management companies require you to buy workers compensation insurance?

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Wayne Brooks
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
5y

Hell no. That means that either 1) they don’t carry workers comp for “their” employees or 2) they hire handymen with no insurance. 

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  • Bjorn AhlbladPro Member
    Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
    5y

    I have never run into this it may be peculiar to Florida? It should be baked in the rates. They are not your employees.

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  • Bill B.
    Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
    5y

    If it is not specific to Florida PMs I would go with someone else and after you tell the first PM why you went with someone else so they stop inventing a profit center. Those people are not your employees. They should have their own insurance. Heck, tell them you don’t want their employees working on your property. You want professionals who already have insurance because they do this kind of work for a living. 

    This is certainly not a thing in NV or MN. 

    1Reply
  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    5y

    Landlords are not responsible for proving workers comp fro a property management company, they provide their own. For anybody working on your home like a contractor, make sure they or you have workers comp.

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    5y

    Hell no. That means that either 1) they don’t carry workers comp for “their” employees or 2) they hire handymen with no insurance. 

    3Reply
  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    5y

    A PMC should only be asking you to add them as additionally insured to your property insurance, as a PMC cannot get liability insurance on a property they have no ownership interest in. This would mainly protect them against tenant slip & fall lawsuits.

    Agree with everyone else above that they should not be asking you to provide workman's comp insurance - that is their problem.

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  • Nathan GesnerBusiness Member
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    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    5y

    Either you misunderstood or your PM is wrong. If this is for the employees of the property management company, then the property management company would pay this cost. If it's for vendors (plumber, electrician, etc.) then they are independent contractors and should carry their own insurance.

    This may be a red flag and time to look for a new PM. Talk to them first to make sure you are reading it correctly.

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  • John Mocker
    Insurance Agent · Norwalk, CT · Member since 2016 · 2k+ posts · 1k+ votes
    5y

    Nicholas,

    You need to speak with your Agent (or one that deals with Commercial Insurance if yours doesn't).  The Workers Comp. laws are state specific so you need someone with experience in FL.  If this was in CT I would ask:

    1. Who is paying the worker who might get injured.  If you are paying his/her employer, then you need proof they have WC coverage and you need to be an additional insured and be given 30 day notice of cancellation.  If you are paying this person directly (either as an employee or an independent contractor) you should have a policy.  

    2. If the Property Manager is hiring either the person or the firm that employs them then the Property Manager should have Workers Comp.  As above, they should make you and additional Insured and give 30 day notice.

    As I mentioned, the FL laws could call for different actions than above.  

    1Reply
  • William Hughes
    Wholesaler · Colorado Springs, CO · Member since 2013 · 3 posts · 1 vote
    5y

    @Nicholas P. Is the mageagement company an employee? Company usually contractor. They are responsible for workers compensation insurance on their employees. And you can remind them of that and that most likely the insurance would deny the claim because the wrong party purchased it.

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  • Matt M.
    Specialist · Easton, PA · Member since 2018 · 1k+ posts · 2k+ votes
    5y

    @Nicholas P.

    I just read this post to my wife who is an insurance underwriter for a huge insurer. Her reaction was a confused look and said “that’s weird”

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  • Hudson Palmer
    Accountant · Member since 2021 · 8 posts · 4 votes
    5y

    In Florida WC insurance is high. Your PMA should disclose this in a fee schedule attached. You should not be paying this directly, but you will pay for it indirectly as those feee would pass from the PM to the property. It will be prudent to make sure your PM has this coverage. In addition, your property should have generally liability coverage. 

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  • Nicholas P.
    OP
    Member since 2021 · 2 posts · 0 votes
    5y

    Section D under owner obligations in the contract is where worker’s compensation is mentioned. The property manager wants me to sign it. 

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  • Paul R.
    Member since 2019 · 10 posts · 3 votes
    5y

    @Nicholas P.

    I'm wondering if that was written by a lawyer who doesn't understand insurance. It's unfortunately quiet common. That section is very poorly worded at best. Honestly, they should show you proof of their insurance.

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  • Judy Parker
    Rental Property Investor · Closter, NJ · Member since 2015 · 884 posts · 722 votes
    5y

    After being a real estate investor for over 35 years, I actually purchased Workers Comp insurance a few months ago. It is not that expensive and protects you if any underinsured or uninsured contractor  (not just a PM) gets hurt while working on your property. Buy it.

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  • Yue Lehman
    Realtor · Fresno, CA · Member since 2020 · 87 posts · 41 votes
    5y

    @Judy Parker the unfortunate stories that some have told are situations where lawyers would go after the onese who have coverage in an event of a lawsuit. Have you been in or heard of similar situations where (let's say) the PM probably should have been liable, but is not properly insured, so that lawyers try to get settlement out of a less liable party?

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  • Judy Parker
    Rental Property Investor · Closter, NJ · Member since 2015 · 884 posts · 722 votes
    5y

    Any contractors, Property Managers, etc. who work on your property should all be insured, and present you with proof of insurance. The Certificate of Insurance must be updated regularly. Having said that, you never know when an accident will happen, and the contractor may be uninsured or underinsured.

    If you have insurance, the insurance company pays for the attorney and the legal expenses to defend you, in the event Landlord gets dragged into a lawsuit. Without that extra protection, Landlord risks getting sued personally. I feel more comfortable having the insurance.

    1Reply
  • David Bellenoit
    Member since 2020 · 7 posts · 4 votes
    5y

    @Nicholas P.

    Everyone is correct here. DO NOT sign this contract. The PM’s counsel tried sneaking in a “not it!” Clause. This means if a casualty occurs (doesn’t matter who is at fault). YOU are on the hook. They get to cry “Not it!” (The child’s game)

    I’ve got thru this experience personally in matters outside of real estate. It’s not a good position to be in. I’m not a lawyer/not legal advice. Just a fellow investment property owner.

    Everyone knows In the old days, if a painter fell off a ladder, his attorney would sue his employer and the homeowner and let the court sort it out, or more likely collect a settlement from both.

    Ask your own insurance company on this for guidance, and if they would sign this clause. I’ll bet they say, “Not unless you want to pay us in truckloads of cash.”

    Whether or not this clause is even enforceable is another question, but why even purchase that lottery ticket?

    It also begs the question of, “does the pm actually have w/c insurance and if so, who does it cover?” They might have extremely poor coverage by saving money in this business model. In which case you’re back on the hook, should something go south.

    You are their customer. So at very least you should demand to be listed as an “additional insured” on their insurance. Better still be listed as “first and primary” (ask your insurer). This way if one of their workers (employee or contract hire) breaks their leg and sues you. You get to be the one to cry, “Not It!”

    Again, Your insurer is the best source of advice on this, but IMO, any client signing this would be very foolish.

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  • David Bellenoit
    Member since 2020 · 7 posts · 4 votes
    5y

    @Nicholas P.

    Also forgot to mention: you could just cross out that clause (initial it if you like), before you sign and return it. Just be sure they sign and return the deleted clause version.

    ALL contracts are negotiable and best have both parties signatures. Good luck with your property!

    1Reply
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