Honolulu landlords need to add their property managers to their insurance policies as an additional insured, and today we are explaining why.
Property Management Honolulu: Interest vs. Insured
First, you need to understand the difference between additional interest and additional insured. If you name someone as an additional interest, that’s similar to listing a mortgage company or another party who just wants to be informed about renewals, cancellations, or changes in the policy. Additional insured is where your insurance carrier will take coverage and extend it to your Honolulu property manager.
Covering Shared Interests
The reason you need to do this is because you and your property manager have a shared interest in the property. While your property manager should have general liability and E&O insurance, those policies do not extend coverage to property-related incidents like fires, floods or water loss, a trip, or a dog bite incident. Because you and your property manager have a shared interest, most management agreements will have an indemnification clause. That usually entails something like if there is a property-specific event, you as the Honolulu owner will hold harmless and defend the property manager against claims resulting from that incident. By extending your insurance coverage to your property manager, some of the responsibility of the defense is shifted to your insurance company. So, if something were to happen, your insurance carrier will take on some responsibility to defend the property manager. If that coverage is not in place and you don’t name the manager as an additional insured, you as the owner might bear some financial cost for the property manager to maintain a defense.
Communicate with Your Insurance Agents
It’s always important to discuss these matters with your attorney and your insurance agent. Not all insurance companies will allow landlords to add their property manager as an additional insured. However, it’s a very common request and a good property manager who understands risk and liability will require that you add the company to your insurance policy. Some insurance companies will charge you for this service, but many of them do not. Your management company will most likely not pay to be added to your policy because it’s a typical requirement that you’ll find in most management agreements.
Here is more information about the Types of Insurance Policies a Property Management Company Should Have.
Here is our original article about Why list my Property Manager as an additional insured?
If you have any questions about insurance or Honolulu property management, please contact us at Certified Property Solutions.