Subrogation Rights for Rental Property
Rental subrogation is a process by which a landlord or tenant may seek to be made whole for damages to their property or to themselves. The landlord or tenant may assign the right to subrogation to their insurance carrier. State and local laws and statutes govern subrogation rights and responsibilities of the carrier who normally will have a team of experienced professionals to devote to this process.
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Property Owner Rights
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When a claim is submitted by the landlord to the carrier for damages caused by the tenant, one solution the carrier may have is to pay the claim and pursue or subrogate against the tenant or the tenant's insurance carrier. If liability is proven against the tenant, the carrier must make the landlord's carrier whole or pay back the full amount of the loss, plus any deductible that the insured landlord was responsible for, unless excluded from the policy provisions. In a situation where the tenant did not have renter's insurance, the tenant may be pursued by a collection attorney for a settlement or a repayment plan. In the event the tenant refuses to pay, a suit may be filed in a local court for damages.
Tenant Rights
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Likewise, the tenant or renter's carrier has the right to subrogate against the landlord or other tenant who is found liable for damage to a covered item.
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Types of Subrogable Damages
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A tenant may have personal property--say, an expensive rug--damaged by a leaky water pipe. In this case, the landlord may be liable. The tenant is also protected from any other tenant that may cause damage due to an overflowed toilet, tub or sink in another unit.
If the tenant damages the property of the landlord and liability for the act is not excluded on the renter's policy, the landlord's carrier can subrogate against the tenant's carrier for damages. If the tenant does not have renter's insurance, they are personally liable for any damage caused.
Recovery
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If the tenant causes a fire, not only can the landlord pursue for damages, but also the other tenants can sue for damaged property, medical expenses and additional living expenses. The landlord can pursue recovery for personal property, medical expenses and loss of rents due to inhabitable units.
If another tenant or the landlord or a subcontractor working on behalf of the landlord causes a fire, the tenant has the right to pursue any or all persons for personal property damage, medical bills and additional living expenses incurred while the apartment is being repaired. Additional living expenses would include a hotel and meals during the period of time that the the tenant is displaced.
Items Not Covered
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If a loss occurred due to an intentional act by either party such as arson, the carrier of the insured responsible is relieved from liability. Also usually excluded is damage to property or persons by pets. Water damage due to backup of sewers or sump pumps is a common exclusion, but it can usually be added to the policy for an additional premium. If you have items of greater value than your policy limit, ask your carrier about purchasing additional insurance. Exclusions will vary from state to state and from one carrier to another, so be sure and read your policy carefully.
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