One of the simplest, yet most effective ways for landlords to protect their assets is to require their tenants to hold liability insurance. When a tenant buys a renter’s insurance policy, there are typically two aspects to the policy. Within certain limits set forth in the policy, tenants can have their contents covered against fire or other losses. When the Alameda fires swept through Southern Oregon, it devastated homeowners and tenants alike. Tenants who did not have renter’s insurance lost everything they owned. Tenants may have other benefits like loss of use if a covered peril puts them out of their dwelling.
The second aspect of renter’s insurance is the tenant’s liability insurance. This covers losses the tenant is responsible for in the event of negligence. Suppose the tenant is cooking in the kitchen and accidently causes a fire, or accidently leaves the water running and causes a flood. In the event the landlord files a claim on their landlord policy, the insurance company will recoup their losses against the tenant’s insurance company. Tenant liability insurance typically does not cover acts of willful damage caused by the tenant. In a fit of retribution, if the tenant spray paints the walls and breaks out all the windows, that is typically not covered by Tenant’s Liability Insurance.
In Oregon, 90.222 allows Landlords to require tenant’s to hold Tenant Liability Insurance up to $100,000 if it is required in the written rental agreement. Landlord’s must advise applicant’s of this requirement in writing and tenants may be except from the requirement if the household income of the tenant is equal to or less than 50 percent of the area median income, adjusted for family size as measured up to a five-person family, as determined by the Oregon Housing Stability Council based on information from the United States Department of Housing and Urban Development (ORS 90.222(8)) or if the dwelling has been subsidized by public funds (ORS 90222(9)). If a tenant is in a month-to-month tenancy, a Landlord may amend a written rental agreement to require renter’s liability insurance after giving the tenant at least 30 days’ written notice of the requirement (ORS 90.222(3) but the Landlord must disclose the exceptions explained above.
For tenancies requiring Tenant Liability Insurance, Landlords can require tenants to provide proof of insurance before allowing the tenants to move-in. To ensure a tenant doesn’t cancel their insurance right after move-in, a Landlord can also require the tenant to list the Landlords as an interested party on the policy. When a Landlord is listed as an interested party on a renter’s insurance policy, the Landlord is notified by the insurance company if the policy is cancelled.
If a tenant fails to maintain sufficient tenant liability insurance, the landlord may issue a 30 Day Termination Notice giving the tenant 14 days to cure by producing proof of insurance. If the tenant cures by producing proof of insurance, but again fails to maintain sufficient Tenant Liability Insurance within the next 6 months, the Landlord may terminate the tenancy with 10 days notice for repeat violation.