Welcome to our “Is It Covered?” series. For a fuller introduction of the series, read HERE. We hope these quick reads will help you increase your understanding of your insurance coverage, clear up confusion and help you avoid preventable losses! Please bear in mind that insurance policies may vary, so always check your own policy for language specific to your covered property. If you have coverage questions, don’t hesitate to call your agent who will be happy to assist you!
So, what’s the confusion?
While your Property Coverage protects damage that happens to your investment property itself, (i.e. the physical building), your Liability Coverage protects your financial well-being associated with that property (i.e. if your negligence at that property were to harm someone else). Property policies intended for investment properties usually exclude Wear-and-Tear due to animal nesting or infestation, while General Liability policies for your property will often have limitations on the coverage offered for dogs and other animals, such as injury due to dog bites.
What type of damage is excluded?
As mentioned briefly above, Wear-and-Tear caused by animal nesting and infestation is typically excluded in most Property policies. This can include anything from squirrels or birds taking up residence in the attic to termite damage to the secretions left behind by cockroaches and other insects. (Yuck!)
As for injuries that an animal on the premises may cause (a tenant’s dog, for example), there are often total exclusions or limited coverage for those injuries within the General Liability policy. Though injury to the animal itself may be covered by your tenant’s own pet health insurance policy, it is possible that you may be held responsible if your tenant’s dog bites someone. Coverage for that injury may or may not be included in your policy, so read up!
What you need to know about dog bites as a landlord:
Landlord liability for dog bites is different in each state. In some states if you know a dangerous dog is maintained on your rental property you can be held liable for any incidents involving that dog. Different lists have been compiled that include breeds of dogs that account for a high frequency of dog bites and the amount of damage the dog could inflict. Lastly, any dog, not properly socialized or put into a situation where the dog feels threatened, may react by biting.
What does the technical lingo for this exclusion look like in my policy?
Sample policy language may look like this:
Wear-and-Tear to the Building Itself:
“We will not pay for loss or damage caused by or resulting from any of the following:
Nesting or infestation, or discharge or release of waste products or secretions, by insects, birds, rodents or other animals.”
Limited Liability Coverage for Injuries Caused by Animals:
“The coverage under this Policy does not apply to “bodily injury”, “property damage”, “personal injury”, “advertising injury”, or any injury, loss or damage arising out of or caused by any animal, birds, reptiles or insects regardless of whether owned by you, in your care, or on your premises. Provided, however, that this Policy provides a sublimit of $25,000 per occurrence and in the aggregate for bodily injury caused directly by a dog bite on your premises, whether or not the dog is owned by you or in your care.”
*As insurance policies may vary, please check your own policy for language specific to your covered property.
What can this type of damage cost me?
One of the most common pets, dogs, can also be one of the riskiest. According to the Centers for Disease Control and Prevention, 4.5 million people suffer dog bites each year, with about 900,000 requiring medical treatment! Furthermore, according to the Insurance Information Institute, in 2018 about a third of all homeowner’s policy claims made were due to dog bites and other dog-related injuries with an average cost per claim of $39,000.
You would think that you should not be liable for the actions of a dog that is owned by your tenant, but Landlord liability for dog bites is different in each state. If you are held responsible for an injury that isn’t covered by insurance, it could easily cost you your business, not to mention the impact that it could also have on your personal financial or emotional well-being. Remember, dogs aren’t the only animals that can cause injuries or physical damage to a property. As I’m sure you are aware, cat urine can be one of the most difficult things to remediate in a property, for example.
What can I do to protect myself from issues with animals?
First, know what is in your policy. Read the sections of your insurance policy that address Wear-and-Tear caused by animals and any exclusions or limitations to coverage regarding animals. It is important to know both what you are and are not covered for. If you don’t understand something or have questions, don’t hesitate to contact your agent who should be happy to help you!
Require your tenants to carry renters insurance in the lease and enforce it. Let them know any insurance you carry on the property as the owner does not apply to their personal belongings (or pets!). Impress upon them the importance of reporting any hazardous conditions on the property or any incidents involving an animal to you or your property manager immediately. You will want to include a section in your lease where the tenant acknowledges their understanding of these items and the penalty for breaking this section of the lease.
Be proactive when it comes to routine maintenance. During your regular inspections, check for any animal “invasions” including nests, debris and waste created by insects, birds, rodents or other animals. Stay on top of repairs before animals have a chance to damage the structural integrity of your property or become a health hazard to your tenant.
Consider not allowing pets or limiting the types of animals allowed at your properties. It may seem like you are being a kill-joy by not allowing pets on your property, but you have to carefully consider the risks versus the rewards. Pets are great, but if the risk of injury or potential property damage outweighs the benefit to your tenant, it may not be worth the chance. On the other hand, if you do decide to allow dogs, cats or other furry, feathered, or scaly creatures, it is always wise to meet the pet before accepting that potential tenant. Set up a short visit with your prospective tenant to meet the pet in their current environment. You will also gain valuable information about how they keep their current home!
Either way, be very specific in your lease: If you decide to allow pets your property, be very specific as to what types, how many and any additional cost associated with keeping a pet on the premises. If you don’t allow pets, spell that out clearly. In either case, thoroughly review the entire lease with your future tenant and have them initial by those items to signify that they understand the terms of the lease….and then be sure you enforce it!