Insurance Can Save Landlords Accused of Wrongful Eviction
It's every landlord's greatest fear: The problem tenant. The one who swears he'll have the two months' rent he owes next week. The one who makes unauthorized changes to the property, then tries to credit the cost against the rent. The one who causes significant damage. At some point, their landlords decide to evict them.
They may feel fully justified in the decision. However, there are serious legal considerations involved. Any landlord who wishes to evict a tenant must understand applicable laws and follow them closely.
Every state has laws that limit the ability of landlords to evict tenants. They permit landlords to evict only for certain specific reasons. They also lay out the process landlords must follow. The laws vary from one state to another, but they tend to require three steps:
- The landlord must give the tenant a formal notice of a problem. For example, the landlord would send a notice about overdue rent.
- If the tenant does not resolve the problem, the landlord can take legal action against the tenant.
- If the judge rules in the landlord's favor, the tenant must move out of the premises. The landlord has the right to ask law enforcement to forcibly remove a tenant who will not leave voluntarily.
A "wrongful eviction" is one where the landlord violates the eviction laws. One form of wrongful eviction is to order a tenant to leave without following the required process. Another is to make conditions intolerable for the tenant. A tenant who believes he was wrongly evicted may decide to sue the landlord.
Commercial general liability insurance policies include "personal and advertising injury liability coverage." This insurance pays amounts the insured business owes because of certain offenses against someone else. It also pays the cost of the business's legal defense.
The definition of "personal and advertising injury" in most policies includes a number of offenses. Among them:
- Wrongful eviction from
- Wrongful entry into, or
- Invasion of the right of private occupancy of
a room, dwelling or premises that a person occupies.
Therefore, the insurance will apply if a former tenant accuses a landlord of wrongful eviction.
The insurance does not apply to every act of wrongful eviction. The landlord will not have coverage for:
- Intentionally violating the tenant's rights. This would include knowingly kicking a tenant out in violation of the eviction laws.
- Criminal acts, such as assaulting the tenant or endangering the welfare of her children.
- Breach of the rental agreement, such as failing to comply with a condition of the lease.
In all of these situations, the insurance company will not provide a legal defense for the landlord, nor will it pay for any judgments or settlements.
Other provisions in the policy may limit or eliminate coverage. Property owners should discuss these with their insurance agents to gain a full understanding.
Landlords who bend over backward to comply with the laws and treat tenants fairly may still become targets of lawsuits. This important insurance coverage can keep them from financial ruin.