I Just bought a Rental Property under my personal name, and I also bought the Rental Property Insurance, and found the policy shows the insured name is the Property Management Company name. I checked the Insurance agent, who told me, because the Landlord name on my Lease Agreement was the Property Management Company, so the Insured name have to be matched with it.
My questions are:
1. I believe so many Property Management Company sign the Lease agreement represent the Real Property owner with the tenant, is the way Insurance Company insured the name of Property Management Company correct?
2. If the Tenant sued me for anything wrong, would that cover my liability?
3. If the property caught fire, does the insurance Company pay me for the lost?
4. What is the right insured name for the Rental Property Insurance Policy if the Lease Agreement was signed between the Property Management Company and the Tenant? not the Real Property Owner with the Tenant?
This is a question for your Attorney. They will know the case law and requirements in CA.
That said, in CT I normally have the Policy on the property match the owners name on the title. If the Property manager is on the lease they may have an exposure for the Liability but they probably do not have an insurable interest in the Property. The PM should have Liability and Professional Liability to cover their exposure.
Having them as a named insured on your policy dilutes your coverage in a situation where both you and the PM are named in a suit. Say the judgement is for $600,000 and that both of you are 50% liable. If they are on it, your company will have to pay out $600,000. If they are not on it, your company will only pay your portion or $300,000.
Further, the First named insured on a policy controls the policy. If I owned the propety I would be wary of having the Property manager as the First Insured. They could cancel the policy, alter the policy, etc. since they control it.
Lastly, if there is a claim check for the building it will be be made out to First Named insured and the Mortgagee if any. In what you described, the check will not have your name on it and that would scare me.
Hey @Gary Li I would have that changed immediately and fire that insurance agent to answer your question that is completely wrong.
1) Yes it is normal for the PM company to sign the lease agreement. They will also sign the lead based paint agreement that they should be having your tenants sign as well. You should have your name as the named insured and there is a correct way to add a PM company as an additional interest for liability only. It is just like adding a lienholder as an additional interest not the named insured.
2) Since you are not named on the policy this leaves you with no coverage for anything.
3) The insurance company can only write a check out to the Named insured, secondary insured or additional interests in which case both names are often on the check. Insurance is a contract and if you are not mentioned on the contract then you are not a part of it and very vulnerable.
4)You should have a contract with your PM company authorizing them to represent you and sign the lease with the tenants. Typically this contract will also point out insurance requirement you must have ie 300k in liab. much like a mortgagee has replacement cost policy requirements.
Hope that helps, I definitely suggest finding an insurance agent that knows the rental industry better.
Thank you so much, John and Kevin!
You need to have this corrected. If you are not included on the policy, you are not insured. In the event of damage to the property, the Management Company would likely not be insured either, since it does not have any insurable interest in the property.
You also would not be covered for defense or liability for a claim brought against you.
As others have said, your agreement with the Management Company may require you to add them as an additional insured for liability purposes, and there are pros and cons to doing so, but you should review the insurance requirements and indemnity obligations in the agreement to make sure the insurance you bought complies, and covers you for any potential indemnity obligations you may have to the Management Company.
Discuss with your broker/agent, or find one that understands this better. Feel free to DM me if you have additional questions.
Thank You, Michael!