What is liability?
Liability – Covers you for any legal fees and damages for any lawsuits that might arise out of your negligent actions anywhere in the world. This means the coverage kicks in in the event of an accident, in or out of your home, that results in bodily injury or property damage that you are held legally responsible for.
These actions cannot be illegal, intentional or have happened over time. They must be sudden and accidental.
Examples of when a landlord’s insurance policy can subrogate against a tenant’s policy:
– A tenant empties an ashtray into a garbage can and then leaves their unit for shopping. Unfortunately, there were still some burning embers in the ashtray which caused a building fire.
– A tenant starts running the kitchen sink to wash dishes but has headphones on. Tenant goes to another room and forgets the water is running resulting in flooded floors and perhaps damaging a unit below them.
– If a tenant or child accidentally causes holes or were to accidentally drop a can of paint on the floor.
What type of a loss can a landlord’s policy not subrogate against a tenant policy for?
– Any losses/issues that are a result of maintenance or wear and tear issues
– Any losses that arise out of the intentional/illegal damage by the tenant
– Any damage to the unit which would have happened slowly, over time.
How a claim that a tenant is legally responsible for happens:
– If the damage is substantial – Landlord must file a claim with their own insurance company. Your insurance policy will be the first responder but will subrogate against the liability portion of the tenant policy after the emergency situation is remedied. If it is deemed the tenant is liable. This will still result in a claim on the landlord’s insurance policy. Sometimes an insurance company will not count this claim against you if subrogation is successful but subrogation is never guaranteed. It may not be rated for on your policy, and your premiums may not go up because of a claim like this IF subrogation is successful. BUT – you will still have a claim on your record and will have to answer as such if you shop around for another building insurer for the next five years.
You may need to end up in small claims court.
Some great points to share with your tenants in respect to the liability portion of their tenant policy:
– It does cover for legal fees from their negligent/accidental actions anywhere in the world. This means that even if something happens when they are on vacation on the other side of the planet that results in bodily injury to another or property damage, their legal fees will still be covered by their tenant insurance in Ontario.
What happens when the tenant causes a loss that their liability insurance will not cover?
– Hopefully, this is a peril insured by your policy
– You will have to take them to civil court. Doing this does not guarantee you will be able to recover for any losses. This is why it is important to vet your tenants thoroughly and ensure you are doing annual check-ups on your insurance policy to ensure you have adequate coverage.
$1,000,000 is not substantial anymore. Please encourage your tenants to provide a minimum of $2,000,000 liability and check up annually to ensure the policy was not cancelled after keys were given for your unit.
Article from Brittany Metcalf a licensed insurance broker operating in the Cambridge, Kitchener and Waterloo area
