Mandating Renter's Insurance

Question:  I would like to mandate that all future tenants have renter’s insurance.  Am I allowed to make that part of my rental agreement?  

You may require in your rental agreement that all tenants carry renter’s insurance.  However, as a practical matter, enforcing this lease covenant will be difficult if not impossible.  In fact, many landlord attorneys will tell you that evicting a tenant for failing to renew a policy of renter’s insurance will not be easy.  Most likely, the owner will probably fail in an attempt to terminate the tenancy when a tenant decides, after moving in, to cancel the policy.   

The better approach is to state, in the text of the lease agreement, that tenants are advised to carry renter’s insurance, and that the landlord’s policy will not cover any loss to the tenant’s property.  The 2007 SFAA Lease, which will be available in April, contains such language.  Paragraph 33 of the new lease states as follows:  

“33. INSURANCE: Owner’s insurance does not provide for coverage of Tenant’s personal belongings or personal liability unless as a direct and proximate result of Owner’s negligence. Therefore, Owner strongly urges and recommends to each Tenant that Tenant secure sufficient insurance to protect against losses such as fire, flood, theft, vandalism, personal injury or other casualty.”

Thus, a properly worded lease agreement will achieve the owner’s objective of properly advising the tenant to carry insurance and not to rely on the building’s coverage to pay for personal injury and property damage.  The owner will also not be in the difficult position of annually checking for policy renewals and then be compelled to commence legal action, which could very likely yield a negative result for the landlord, if the policy has lapsed.  

Owners should still understand that a tenant may seek indemnity from the building’s insurance when a loss occurs as a result of the landlord’s negligence.  As stated in the 2007 SFAA Lease, coverage is excluded unless the loss occurs because the owner did some wrongful act or failed to take necessary precautions to prevent harm from occurring.  For example, if you know that the roof leaks and you fail to fix it, the tenant can sue you for water damage, including harm caused by mold.  A premises that is not properly lit is a magnet for injury claims.  Likewise, if you do not maintain code compliant fire/smoke alarms/extinguishers in working order, your carrier, and perhaps you, will be paying for injuries and property damage should a fire occur.  As a general rule, when damage happens because of your fault, your policy pays regardless of whether the tenant has renter’s insurance.  Yet when the tenant’s bike is stolen out of the garage, or the entertainment system is destroyed during an earthquake, you can lessen the likelihood of the tenant receiving indemnity from you and your insurer when the rental agreement places the tenant on notice to procure adequate protection.  

So, in conclusion, tell your tenant to carry renter’s insurance in the lease agreement, but you probably cannot enforce a rule requiring annual renewal of such a policy.  More importantly, ensure that your building is well maintained so that the tenant can never make a claim against you or your policy.  

DW