Utah company creates niche in renter coverage

An errant cigarette butt. Candles perched too close to the curtains. Toys flushed down the toilet.

Property damage caused by negligent tenants has long been a source of ire for landlords. But one Utah company says it has a unique answer, the first policy in the country to protect landlords and property owners against damage caused by tenant negligence.

Renters Legal Liability was founded in mid-2004, after its principals — a lawyer, a CPA and a longtime insurance professional — were sought out by rental property owners regarding the cost of repairing damage caused by tenant negligence.

"We were approached by property managers who were tired of having losses to apartments caused by tenants, tenants who don't have the means, money or insurance to pay for that damage," said James R. Dickson, RLL chairman. "We thought, 'Well, that's a very viable exposure, and something we should look into.' "

What they found, according to Dickson, was that more than 80 million people rent apartments in the United States, and the majority choose not to purchase renters' insurance. That leaves the landlord/owner two options, according to Dickson: pay for repairs, or compel the tenant to take responsibility.

But according to the Independent Insurance Agents & Brokers of America, a poll conducted in 2004 found that 64.4 percent of respondents living in rental properties had no insurance. The most common misperception among renters, according to the poll, was that they were covered by their landlord's insurance.

Many, if not most, rental agreements and leases state that the tenant is responsible for damage caused by his/her negligence. But, Dickson said, "if you as a tenant cause a fire in the kitchen, the owner has to report it to his primary insurance carrier. The carrier comes in and handles the claim, and the landlord comes to you and says that under the terms of your lease you're responsible for that damage. The next day, you're gone, and the primary policy ends up paying.

"After the apartment has had two or three losses like that, two or three things that happen, the rates go up or the insurer doesn't renew the policy," he said. "The landlord kind of takes it in the shorts, and it's because of nothing he did."

The RLL policy, priced at $6.95 per month and underwritten by Lexington Insurance, covers up to $100,000 in damage caused by fire, accidental water discharge or overflow, sewer backup, explosion and smoke damage. The tenant will be reimbursed for up to $1,000 of personal property coverage, and $50 per day as a reimbursement for additional living expenses, for up to 20 days.