When it comes to rental properties, the onus of providing adequate public liability insurance falls squarely on the shoulders of the landlord. There are no two ways about it. And, despite best intentions, accidents (and incidents) can and do happen. So, it’s vital landlords have adequate insurance in place before they put their property on the rental market.
Prevention is better than cure
The best course of action for a landlord is to avoid insurance claims and disputes altogether. Tenants have the right to a property that’s fit to live in, reasonably clean and in good repair. They also have the right to have repairs done in a timely manner once defects are reported. When a landlord neglects their responsibilities and fails in their duty of care to their tenant, the results can be dire.
In 2013, a Melbourne man received a $300,000 public liability compensation payment after he sustained serious injuries when the balustrade of a balcony collapsed at his rented property. The tenant sued the landlord and it was found that the balcony had not been properly maintained nor properly routinely inspected.
The tenant’s insurance lawyer alleged that ‘the landlord had been warned by previous tenants that the timber of the balcony was rotted, however the landlord failed to ensure that it was adequately replaced.’
The case for insurance
In light of public liability claims such as these, it’s essential that landlords/property investors purchase landlord insurance. For the price of several hundred dollars each year, a landlord can be confident they’re covered for public liability, damage to buildings, contents, rental defaults as well as damage caused by tenants. And if peace of mind is not incentive enough, landlord insurance is tax-deductible against the income derived from the investment.
Read the fine print
Not all landlord protection policies are the same, so it’s important to check the policy wording carefully. The key to buying insurance is to ensure you have adequate coverage for the risks you face. This may include coverage for:
- Natural disasters such as storms (including lightning strikes), fire, flood, earthquake, tsunami.
- Building cover to protect yourself from incidents involving structural aspects of your property, such as gas and plumbing systems, fixed appliances (gas/electrical), pipes and cables, fixtures and fittings, awnings and other external structures such as roofs, staircases and balconies.
- Accidental damage caused by tenants, theft, malicious damage and loss of rent due to tenants leaving without paying.
Injury to tenants and third parties
Landlord insurance usually includes public liability insurance or legal liability cover, which insures the landlord for death or bodily injury to other people or damage to other people’s property. For example, public liability insurance will cover the landlord where:
- a piece of old carpet comes loose and the tenant or visitor slips and falls and injures themselves
- the timber of the stairs, balustrade, balcony or decking rots and the structure collapses and causes injury or death
- an old gas heater leaks, causing carbon monoxide build-up and potential poisoning or even death.
Generally, public liability insurance covers up to $20 million for the landlord’s legal liability for an incident at their rental property. If the tenant makes a claim against the landlord, and they are found to be legally liable, public liability insurance will cover the landlord for:
- damages awarded to the claimant
- the landlord’s legal costs in defending the claim
- the claimant’s legal costs, if the landlord is at fault.
Without public liability insurance, the landlord could be in for a very expensive time.
So, if you’re a landlord thinking about taking out insurance for your rental property, the advice is simple: don’t think, do.
Dimi Ioannou is a Principal lawyer in Maurice Blackburn's Melbourne office.