I’m sure that when you and your clients are looking at landlord insurance you concentrate on a couple of key sections of the policy.
No doubt you’ll look closely at the cover against natural disasters and other events like theft or impact damage.
And you’ll also be keen to look at the inclusions for tenant-related losses, like loss of rent or tenant damage. It makes sense. These are what landlords claim on most.
You may not think too much about some other sections of the policy, like legal liability.
You might note the cover is there for legal liability (or public liability) and that it’s for a sum that sounds like a mega lotto draw – typically in the tens of millions of dollars – and then think nothing more of it.
That’s until something happens at the rental that results in a legal liability claim – then your landlords will be glad the policy had that inclusion!
So what exactly is liability (or public liability) cover?
Well, according to the Cambridge Dictionary, it is: “responsibility that someone has for their actions, for example the responsibility to pay another person for harm or damage that is a result of these actions”.
In a nutshell, if a landlord is found responsible for an accident at a rental property that causes injury, then they are liable for compensating the injured party.
Your agency will have public liability insurance in case a visitor is injured or has their property damaged while they’re on the premises.
The insurance is a no-brainer (and often mandatory) for businesses, but it’s also essential for residential property owners too.
Any owner, including a landlord, could face a liability claim if someone is injured on their property because of something they did or, more often, failed to do.
What are landlords liable for?
Landlords, and an agent acting on their behalf, have an obligation to provide a safe and habitable property for tenants and any person who is legally on the premises such as guests, delivery people, tradies, utility meter readers or visitors (like charity collectors).
In practical terms, this means landlords must take reasonable care to avoid foreseeable risk of property damage or harm to their tenant and other visitors to the property.
Common law dictates that landlords must ensure the safety of their rental properties, including:
- ensuring installations such as gas, electricity and heating are working properly and safely;
- ensuring any appliances they provide are installed and maintained safely;
- treating potentially health-threatening issues such as rising damp;
- maintaining the structure and exterior of the house; plus
- any other matter that is detailed in the tenancy agreement.
In addition, each state and territory have other safety requirements that must be met including building standards and fire safety standards.
Common situations resulting in landlord liability include:
- the premises being in disrepair;
- building standards not being met; and
- fire safety standards not being met.
A landlord or rental agent may be found liable for property loss or injury in a rental property if the injuries/losses result from a dangerous condition or state of disrepair at the premises:
- which had not been identified because the landlord or their agent failed to conduct regular inspections; or
- which they were warned of but failed to properly rectify within a reasonable time.
If a landlord fails in their duty of care, the injured party can seek compensation from them.
And those costs and compensation payouts can stretch from tens of thousands to hundreds of thousands or even millions of dollars once medical costs, loss of income and pain and suffering are factored in.
Negligent or not?
Heads up! For a landlord to be held legally liable, they must be found to have been negligent.
Legal liability hinges on the fact that the landlord knew, or should have known, about a risk and failed to act on it.
This means a landlord generally will not be held liable for losses/injuries that are caused by a defect, hazard or condition that they did not know about and could not have reasonably known about.
So, what happens if the landlord wasn’t aware of a hazard, but the agent was?
If the agent fails to notify the landlord of a potential liability issue and a claim is made for injury or property damage, then the agent can be held responsible.
Legal liability cover
Legal liability insurance provides the policyholder with protection against claims resulting from injuries and damage to people and/or property.
The policies cover both legal costs and any payouts for which the policyholder would be responsible if found legally liable.
Admittedly, legal liability claims aren’t in the same league, number of claims wise, as claims for loss of rent or damage, but incidents and claims occur more often than you may think – and they usually result in much higher payouts.
Given the potential costs of compensation claims, legal liability insurance is a must for landlords.
And it’s why when you are looking at insurance policies with your clients, you need to consider the provisions for legal liability.
It’s a standard inclusion in all EBM RentCover policies, but never assume it’s the same with other insurance providers.
A legal liability claim example
Examples of claims involving public liability issues are numerous. The person found liable will depend on many factors.
If a visitor at a rental property falls down the external stairs and sustains injuries, the first question to ask would be around the cause of the fall.
If the visitor fell because the stairs needed an urgent repair and the tenant had reported the faulty stairs to the rental agency, the next question is whether the agency advised the landlord of this request.
If the agency failed to notify the landlord, liability would most likely rest with the agent.
If the agent advised the landlord and sought instructions to incur costs in a timely manner, but the landlord took no action to fix the stairs, liability would likely rest with the landlord.
However, if a visitor fell because of a hazard created by the tenant’s actions or a tenant failed to let the agent know of a safety issue, a visitor is unlikely to be successful against the landlord or agent in a liability case, but they may have a claim against the tenant.
If the stairs did not have a fault of any kind and a visitor fell simply because they did not pay attention, a visitor will unlikely have a claim at all because people must take reasonable care for their own safety.
The bottom line
Make sure your landlords are protected with legal liability cover.
They may never need it (and I hope they don’t) but, if something happens at their investment property, the cover could prove invaluable.
Disclaimer: This is not legal advice. If you need advice about your liabilities under the law, you should contact a legal professional.