Rental Condo Unit - Property MGT want to be listed as AI

[steve32]

I have a client that owns a rental condo unit. His property management wants to be listed as an additional interest. But the insurance company doesn't want this.

Can anyone recommend what to do or if there is a carrier that they would recommend for this?


Thank you in advance.

[InsMgmt]

My advice to my client would be to ask the management company why they want to be added as an "additional interest". Chances are, my client would be told that this is what they (real estate management co) have been advised to do by their attorney or their insurance broker as a risk transfer measure. I would tell my client to simply state that the management company does not have an insurable interest in the property, and, consequently, the insurance company will not add the management company as an AI. I suspect that the management company may have a greater concern for the liability exposure than some imagined interest in the property, in which case, my client would ask and I would provide a Certificate of Insurance showing that premise liability coverage is in place. I would, in turn, suggest to my client that s/he require of the management company a Cert showing that they have GL for their business activities and E&O for their professional conduct. It should not take the management company long to relax the requirement to be added as an AI in order to save their 10% monthly management fee.

I would further advise my client to then take the property management agreement to his/her attorney for review. What other undesirable clauses might be contained in the agreement and should be negotiated out.

My experience with property managers is that they typically know little about insurance and simply follow the advice of counsel or some attorney they listened to in a break-out session at a conference; until they are at risk of losing their commission or management fee, at which point they back down. The problem with this scenario is that my client will often let it go at that, but the written agreement has not been revised and they may find themselves contractually liable. So, the final word to my client is to get the agreement to his/her attorney for review.

[brokerdave]

I agree with InsMgmt's position and further offer that the property manager should be the primary source of recovery for liability, especially professional.

A property manager offers an offsite owner the "peace of mind" of having direct supervision of his property. As such, the prop mgr assumes responsibility for discovering circumstances/conditions that could result in liability. Most definately, in the event that they also handle the rental of the property, any and all claims resulting from that function (discrimination, for example) are a direct result of the pro mgr's actions.

I would advise your Condo Owner to demand that they are named as an AI on the property manager's GL and Prof Liab policies.

[cwteague]

A real estate management company is automatically included as an automatic insured under the "who is an insured" on the GL policy. Highlight this verbiage and send over to them. This should be sufficient that they're covered under your client's policy.

[RMCSUSNRET]

Not sure in your state but I believe that in VA a property management company is
automatically included as additonal insured/iinterest.

RMCSUSNRET

[steve32]

Is this true with Safeco also? I'm reading the policy and can't find that wording.. thank you

A real estate management company is automatically included as an automatic insured under the "who is an insured" on the GL policy. Highlight this verbiage and send over to them. This should be sufficient that they're covered under your client's policy.

[cwteague]

Safeco uses ISO forms thus it should be in there. Look for Automatic Insureds in Section II- Who is an insured. It should list the named insured's real estate manager as an automatic insured.

CWT

Is this true with Safeco also? I'm reading the policy and can't find that wording.. thank you

A real estate management company is automatically included as an automatic insured under the "who is an insured" on the GL policy. Highlight this verbiage and send over to them. This should be sufficient that they're covered under your client's policy.

[socalmark]

Farmers Insurance will do it with no issues.
In California at least, this is standard practice for Prop. Mgmnt. Co's requiring to be named as addt'l insureds on any property they handle. Just like on any office building the tenants are required to name the Mgmnt Co as an addt'l insured on their G.L or BOP. Rental Condo really not any different.

[InsMgmt]

CW Teague is correct if your client has commercial GL coverage for the rental unit:

COMMERCIAL GENERAL LIABILITY
CG 00 01 12 04

SECTION II – WHO IS AN INSURED

2. Each of the following is also an insured:

b. Any person (other than your "employee" or
"volunteer worker"), or any organization while
acting as your real estate manager.

Is commercial GL coverage in place for your client, or simply a DP form, in which case there is no liability coverage provided? Adding liability coverage to your client's HO policy to list the rental unit may only afford premise liability coverage, which will not satisfy the requirement of the management company.

If it were me, I would first resist the requirement to add the management company - preferring to have them list me as an AI on their GL and Professional Liability policies. If that simply wasn't going to fly, then I would have a commercial policy issued to cover my "business" exposure in the rental unit and do as CW suggested - highlight the wording in the GL policy and shoot it to the management company in hopes that that would satisfy their need.

[keegerusni]

As a PL underwriter I see this a few times a year. My firm has two different endorsements available, one being the Additional Interest and the other the Additional Insured.
I would think the mgt company is looking to be added as the Additional Interest which would just give them notification that the client has lapse or cancelled coverage. If no coverage is replaced by the insured, then they might force coverage to ensure the unit owner has the correct liability to cover in the event of a claim.
I would never add an mgt company as an Additional Insured.

[InsMgmt]

Initially, it was asked of Steve, why the management company wants to be added as an Additional Interest. We never did get an answer, so we are left to assume that there may be a contractual requirement to do so.

If it is the Condo Association Bylaws driving the requirement, then chances are the Condo Association Masterpolicy will automatically include the management company as an insured for its liability exposure, and the client simply needs to provide a Certificate of Insurance, Evidence of Property Insurance, or list the management company as an Additional Interest for notification in the event the insurance is cancelled or nonrenewed.

If this is simply a real estate firm handling the rental of the unit, as may be the case with vacation destination property, then it would seem to me that the management company has no insurable interest in the property and should be naming the client as an addtional insured on their policies (GL & Professional Liability) and waiving subrogation - not the other way around.

But, without further information we can only speculate and take a stab at a solution. Steve?

Academic discussions can be some value to the forum, but only if we work through the problem with relevant facts.

[steve32]

Thank you for all of your help so far. Yes, this is simply a real estate firm handling the rental of a unit owned by an individual.

I asked him why they need to be listed as an additional interest and he hasn't gotten back to me yet.

Thank you again - I appreciate it.

[sak]

I have a Condo rental Program with Lloyds, If you are interested in seeing if I can help, please let me know how I can reach you.

Thank you

sak

[larryziegler]

It is very common for property management firms to require the A.I. Endorsement. Farmers and State Farm issue these all day long on any P/L property policy form it seems. A "real estate manager" is automatically included as an insured under a DP-3 policy and an ISO A.I. Endt does exist for Liability only issues on the DP-3 form. The problem here is that a rental condo is generally covered using the HO-6 for along with the HO-33 Unit Owners Rented to Others Endt. The HO forms do not include real estate managers under the definition of insured, nor are there Liability only A.I. Endts. to provide coverage as required by the property management firm, as this policy type is intended to be owner occupied and not held out for rental. Vacation rentals with occasional owner occupance are extremely difficult to write here in Calif.
I find this situation difficult to fathom, as it would seem that the prolperty manager should be supplying the appropriate evidence of liability to the owner, but it is what it is, and thus very difficult for us independent agents to deal with.

[markn62]

keegerusni,
I'm curious why you would never add an mgt company as an Additional Insured? I'm with Liberty Mutual and they will only do an "additional interest" not an "additional insured". Will it put me at a legal disadvantage if I were to carry the PM on my rental insurance policy?

I don't understand why the PM's don't simply get bonded rather than put the burden on modification of their client's insurance policy.