Tenants, Landlords, and Insurance

Water damage, fires and other property losses… who pays?

The short answer is: you’re responsible for your own property despite the fault or alleged fault of others.

Apartment complexes can have many tenants for example, and as a result, renters and their insurance companies can vary. When a loss occurs, each individual renter and the landlord should find relief from their respective insurance policies, whether they’re the same carrier or different carriers. This should be done for a variety of reasons; primarily, your own insurance offers replacement cost as opposed to someone else’s liability, which only pays actual cash value (replacement less depreciation).

Additionally, if you’re waiting on the ruling of liability from a 3rd party or neighboring renter/landlord, this could take time to investigate and financial aid will be delayed. Insurers will subrogate and recoup any claims paid from a responsible party if negligence is proven, including your deductible. So, it’s best to utilize your own policy(s) and let the insurance companies hash it out!

“Filing and recouping financial loss from your own policy typically only takes a couple of days. Having the same insurance company as your neighbors or landlord doesn’t change the formula for relief. If the loss includes multiple parties, each party should file a claim on their own policy and each claim will have its respective adjuster to represent each party,” said Nick Arnoldy President/CEO of Marshfield Insurance. “The theory of having the same insurer for all entities can be unrealistic in large buildings with many renters, therefore the process is uniform regardless of representing insurance companies.”

What if you’re a tenant who made improvements to the building? In commercial settings, it’s common for a business to upgrade flooring and add fixtures. These investments are commonly known as tenant’s improvements and betterments (to a non-owned building). When it comes to insuring those assets, tenants need to insure them as a part of their contents limit… not under building coverage. Contracts or some leases can shift the responsibility of the betterment or improvement to the landlord, but in the absence of a defined responsibility the aforementioned method is the general rule.

“Tenant’s betterments and improvements are defined in a commercial property insurance policy under contents or business personal property. This can be confusing as your investment becomes part of the building, however tenants don’t have any insurable interest in the building they rent, they don’t own it,” said Arnoldy. “Therefore, policies include coverage under the contents description for building betterments and improvements of a tenant. Misclassifying betterments and improvements under building coverage can result in a claim denial, so it’s important to put that coverage in the correct category.”

With two dozen agents, three Central Wisconsin locations, and more than fifty insurance carriers represented, Marshfield Insurance’s experienced team can help you identify your exposures in commercial property, tenant’s coverage, liability, and make appropriate recommendations. Contact us today!

Arnoldy currently serves as Board President for the Independent Insurance Agents of Wisconsin and is a committee member for the Wisconsin Office of the Commissioner of Insurance’s Property & Casualty Advisory Council.

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