Should I Add My Property Manager as Additional Insured to my Landlord Insurance Policy?

One of the major benefits to using a property manager is to help reduce a landlord's risk of owning a rental property.  To maximize this benefit and to further reduce a landlord's risk of liability, landlords should strongly consider adding their property manager as "Additional Insured" to their insurance policy.  Adding this verbiage to a landlord policy is a win-win for both the landlord and property manager, but not all insurers offer this protection, and there are some misconceptions among insurers about providing this protection.  Below are answers to our most common questions on the topic.  

NOTE: We are not insurance experts.  Please consult your insurance professional to understand your individual insurance needs.  

What insurance should my property manager carry?

At a minimum, your property management company should carry:

• General Liability.  This covers claims involving bodily injury and property damage resulting from the property manager's operations.  
• Errors and Omissions.   This covers claims involving mistakes in your property manager's professional services, and is common coverage for those involved in real estate transactions.  
• Worker’s Compensation.  If your property management company has employees and is based in New York State, it must carry worker's compensation insurance.  This covers an employee's medical expenses related to a work-related injury.

What does “Additional Insured” mean?

Adding “Additional Insured” verbiage on a landlord’s policy means the coverage is extended not only to the owner of the property, but also to the management company. Generally, property managers have no financial interest in the property, but they do have a very insurable interest from liabilities resulting from personal injury due to fires, leaks, burglary, etc.

Why is adding the property manager as “Additional Insured” important to the landlord?

In the event of a claim such as personal injury, the property manager and the owner are often the target.  However, most reputable property managers include an indemnification and hold harmless clause as part of their management agreement. In the worst of cases, in the event major litigation takes place, having the property manager listed as “Additional Insured” creates a unified defense, with one insurance company defending both parties, streamlining the defense and significantly reducing legal expenses for all parties, for which the owner is ultimately responsible.

Why is adding the property manager as “Additional Insured” important to the property manager?

Most reputable property management companies carry general liability and errors and omissions insurance which offers protection against mistakes or wrongful acts made by the management company.  However, these policies do not provide protection against matters involving the property itself, which
leaves the manager exposed to claims of personal injury related to fire, leaks, burglary, etc. Without an Additional Insured endorsement, the management company would be required to defend itself, and then seek reimbursement from the owner, which is ultimately more costly for all parties involved.

Are insurance companies always willing to add a property manager as Additional Insured?

Adding property managers as “Additional Insured” has been common practice for years in commercial rentals and is becoming increasingly more common in residential rentals. Many larger insurers understand the benefits to their customers and may to do so at no or minimum cost. Some smaller or specialized insurers may not offer such coverage, or will do so at added cost.

What is the difference between “Additional Insured” and “Additional Interest”?

Adding your property manager as “Additional Insured” extends insurance coverage to your property manager and provides the benefits outlined above. In contrast, adding your property manager as “Additional Interest” simply alerts your property manager to any changes made to your policy, such as
renewals, expirations, coverage changes, or lapses, but does not extend actual coverage.