by Mike W. Smith, President
We are seeing increased exposures for insurance related issues for property managers. Almost all property manager's E&O policies exclude coverage for any failure to place or procure any insurance for any client. The basis of the exclusion is that property owners and insurance agents should be held accountable for such claims not the property manager. Unfortunately, based on foreclosure rates and the economy, many property owners are not properly insuring their properties or have elected to drop the coverage altogether. This creates a significant risk for the property manager that is not covered by an E&O policy.
In the example of a slip and fall in a stairwell, typically the general liability policy for the building owner would respond to the claim and also extend protection to the property manager, if the policy is written correctly. Property managers are traditionally named in this type of suit. Since it is the intention of the general liability policy to cover this claim, E&O policies will most likely exclude this type of claim whether or not the actual policy is in force. This presents a significant uninsured risk for the property manager.
What can you do?
As a property manager you should insist on being provided a certificate of insurance from your clients. The certificate should specifically name the property management/real estate agency as an additional named insured and as a certificate holder. The certificate will not only protect you in the event they do not have insurance, but also should provide for you to be notified if the property owner cancels the coverage. Additionally, the property manager should put in place a procedure for getting updated certificates of insurance each year as certificates expire and property owners change polices.