Author Topic: Agree to insurance and indemnification of prop manager?  (Read 1006 times)

Dulcimina

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Agree to insurance and indemnification of prop manager?
« on: August 24, 2016, 09:58:09 AM »
I have a two family house about 50 miles from my residence.  I've been self managing the house for over 10 years, but I'm at the point where it is a good idea to have a professional management company - I'm burned out, and I also don't have a car, which works well for a mustachian lifestyle, but is less convenient for emergencies 50 miles away.

One company has been helping me on a fee basis to do an eviction and find a new tenant. I'm happy with the service.  The problem is that their contract requires me to indemnify and hold harmless, and also to add them as additional insured on my insurance policy. A Google search makes me think this is a fairly common requirement.  PM company will not modify the contract to remove indemnification.  I'd like to get some help thinking this through.

The definition section of my current landlord policy says: "Throughout your 'policy' and its endorsement forms, the following words have a special meaning in your policy when they appear in bold type… "Anyone we protect"  and "Insured" when used in Section II means: 1.     you; … 6. your real estate manager; and..."  Section II then deals with liability. However, current insurance company will not add the PM as additional insured because the PM has no insurable interest.

I've gotten quotes from three additional companies. One company won't work out for other reasons. Second company will add the PM as additional interest, which surprisingly satisfies the PM. But additional interest doesn't actually defend the PM against lawsuits, and would leave me indemnifying the PM without insurance coverage.  The agent hasn't verified the additional insured endorsement with the third company yet, but they charge $2200/year more than my current insurance. 

The options I see are to:
  • Stay with current insurance, add PM as additional interest, and trust that the definitions in my policy mean PM is covered
  • Continue to self-manage.  Maybe buy a car with the money I would have used for more expensive insurance and management fees, continue to use the management company on a fee basis.  I don't want to do this.
  • Find another management company (I'm currently contacting realtors I know for recommendations)
  • Selling? Selling didn't make sense last year, as a couple of houses on my street went into foreclosure after an extended time on the market. might still be worth checking
Am I overlooking other options?

NoNonsenseLandlord

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Re: Agree to insurance and indemnification of prop manager?
« Reply #1 on: August 25, 2016, 06:07:00 AM »
Hire a PM, although get quotes from several.  5-10% of collected rents is a common charge.  YOU need to make sure the tenant quality is up to par.  You may also look into a lease with the option to purchase.  No calls from the tenant, and you get a bit more money.

A PM should also have their own insurance, and you can verify that they do.

LordSquidworth

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Re: Agree to insurance and indemnification of prop manager?
« Reply #2 on: August 30, 2016, 07:27:28 AM »
Your property manager should have their own insurance covering their business. They're less likely to slack when it's their name on the line, not yours covering them.

You don't have your mechanic on your car insurance. If he has to take it out for a quick ride to figure out that noise you complain about and he wrecks it, his insurance pays for it, not yours.

Dulcimina

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Re: Agree to insurance and indemnification of prop manager?
« Reply #3 on: August 30, 2016, 07:59:52 AM »
Your property manager should have their own insurance covering their business.

A PM should also have their own insurance, and you can verify that they do.

I did a Google search before I posted my question here.  The results made this seem like additional insured/indemnification is a commonly accepted clause. I'm glad to read a different perspective.  I'm compiling a list of local PMs to contact and take it from there. Thanks!