Monday, 26 August 2013

Renter's Insurance: Ontario Students take notice!

This is the time of year when many young persons are heading out on their own for the first time---off to college, off to university, or perhaps even just away from home.  First apartments are being rented and leases being signed with roommates, co-tenants, guarantors.  It is an exciting time!

What is often over-looked in the moving away from home process is the issue of insurance.  While there may be some continued coverage for property and personal liability under a parent's home insurance policy there tend to be some gaps in coverage that leave the first time tenant inadequately covered in the event of a problem in the new apartment.

Renter's insurance is relatively cheap!  You can find policies for as low as $150 plus taxes per year. It makes sense to be insured given what the insurance will cover.

A typical tenant's insurance policy will cover you for theft, water damage, fire damage, personal liability anywhere in the world.  Typical policies will provide you with alternate accommodation (payment for it) for a period of time in the event that a fire, flood, or some other disaster makes your premises uninhabitable.  For instance, if the upstairs neighbour forgets to turn off the tub, passes out in a chair, and three hours later you come home to find all of your ceilings collapsed and three inches of water in your apartment--you will be fairly pleased with yourself when you remember that you did indeed buy tenants/renters insurance and your insurance company is now paying for your hotel!

The benefits of renter's insurance can also be a pleasant surprise in instances where you just make a silly mistake, or your roommate makes a silly mistake, and causes a fair amount of damage that your landlord sues you for.  Perhaps you're wondering what that could be?  As an example, and I get these kinds of cases every year, winter arrives in Ottawa and the outside temperature drops.  Before the cold snap hits, and without thinking about it, you open the window in the kitchen a crack (couple of inches) to let the cooking odours out.  When you do it, the temperature outside is nice so you don't realize or remember that the window is open.

You then decide to go home for the weekend, and just as you're leaving you decide to turn the thermostat down a few degrees to save some money (and save the planet!).  Unfortunately, what you don't know or realize is that the following evening the temperature is going to drop well below zero for the first serious freeze of the season.  The freezing temperatures, along with the turned down thermostat and the open window in the kitchen cause a pipe just below the open window to freeze and burst.  As a result, water pours into your unit and the unit below causing thousands of dollars in flood damage.

Burst water pipes (in a heater or waterline) are a very common occurrence in Ottawa.  The damage caused by burst pipes often runs into the tens of thousands of dollars as water floods all the surfaces as it tries to get to the lowest point in the building.  In this example, it would be entirely plausible for a landlord to try to 1) evict you and 2) sue you for the cost of repairs, lost rents, and associated expenses.  Even if your landlord does not sue you, it is entirely possible that the landlord's insurance company would sue you for negligently leaving the window open and causing the pipe to burst.

The pleasant surprise in having renter's insurance is that you are likely covered for any claim made against you for accidentally leaving the window open.  Your insurance company would pay for the repairs, the lost rents, the incidental expenses as well as a lawyer/lawfirm to defend you in any lawsuit.  The relatively low premium of a couple of hundred dollars can protect you from many thousands of dollars in expenses.

I often hear tenants say that they didn't get insurance because they didn't think they would need it.  Of course no tenant plans to be negligent (i.e. leave the window open), but there are so many silly things that any person can do that they don't realize will lead to a lawsuit.  If you are still not convinced, consider that insurance will also pay to defend you from frivolous claims where you haven't actually done anything wrong.

Having a Landlord and Tenant law practice I see so very many problems that could have been resolved if the tenant only had insurance.  I can assure you that most landlords will have a very different attitude towards you if you can say to them, in the face of a disaster, I'm very sorry for what happened but I am insured.

Before rushing out to buy a renter's insurance policy/ tenant's insurance policy, consider calling your parents' insurer or broker and checking to see what kind of coverage you already have.  The broker or insurer may be able to sell you a separate policy that takes into account your family's relationship with the insurer or they may be able to sell you a rider, through your parents' policy that provides the protection you need.

I can't urge you enough to get insurance coverage as a tenant.  It is a small expense for an incredible benefit should a situation arise where you suffer a loss or you cause a loss for someone else.

Michael K. E. Thiele
Landlord and Tenant Lawyer
Ottawa, Ontario
613-563-1131
www.ottawalawyers.com

13 comments:

  1. Great info. Thanks for providing America such a helpful info. continue the great work and continue providing America a lot of quality info from time to time.Landlord Insurance

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  2. Are landlords allowed to oblige tenants to have insurance, and if so, a specific amount?

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    1. Hi Nancy: There is nothing in the RTA preventing a landlord from requiring a tenant to be insured. You should make the clause big and have it specifically acknowledged in the lease. Follow up annually for proof of insurance and take action (Form N5) if the tenant does not have insurance. There are cases where the Board has refused eviction against tenants where the landlord has not enforced the "insurance" clause that is in the lease.

      With respect to the "amount" of insurance I think this is something you should speak with your own broker about. If the rental is inside your home (i.e. basement unit), you would want to ensure that your own insurer is aware of the use of the property as a rental (it changes the risk and hence must be reported to your insurer). When speaking to your broker you may wish to enquire if they would sell tenant policies and whether it is possible to be named on that policy (and whether it is advisable). Being named on the policy should prevent the policy from being cancelled without notice to you thereby giving you an opportunity to do something about it (pay premium, terminate, etc.).

      From an amounts perspective take advice from your broker. That being said, I don't see why you couldn't require a certain amount of liability coverage in your lease as recommended by your broker.

      Michael K. E. Thiele

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  3. Can a new owner of a building enforce tenants to take out insurance policies? Must there be a very specific clause in the original lease to be able to enforce it? I'm dealing with an original lease that includes a simple bullet list of what is to be paid by landlord, and what it to be paid by tenant. It includes things like, hydro, lawn care, cable, and simply "insurance" with a check mark next to the tenant box. Is this sufficient in referring to original lease in enforcing that tenants take out insurance policies? Thank you!

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    Replies
    1. Hi Jessica: I have to picture your lease in my head from your description of it. What you describe does not, in my view, impose an obligation to have insurance in place. At most, I think, it implies that if you are going to have insurance you have to pay for it. Or put another way, the landlord is not paying for insurance for you.

      If the landlord is insistent, he can file an application to the Landlord and Tenant Board to try to evict you for not having insurance. You could argue the point before the Board and take the position that you do not believe that you have to have insurance but that you will purchase it if the Board rules that your lease includes an obligation for the tenant to have and maintain insurance (presumably tenant insurance).

      All of that being said, please do consider getting a tenant insurance policy. It is relatively cheap insurance and it provides a significant amount of protection (a typical policy) in case of flood, fire, theft, or negligence. If you are on assistance such as OW or ODSP you may even qualify to get additional funds to pay for the policy.

      In the event of a fire, flood, theft that makes your unit uninhabitable many policies will pay for temporary shelter for you. If by accident you or your guest causes the flood or fire or frozen pipes or you cause injury to someone through negligence this policy may pay for a lawyer to defend you and pay for any damages that you are ordered to pay. I do highly recommend being insured if you can possibly get a policy to cover you.

      Hope that helps

      Michael K. E. Thiele
      www.ottawalawyers.com

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  4. On September 6th, 2015 we accidently left a pot on the stove and left. The entire apartment was in flames and smoke billowed out of the building when we returned. We were not criminally charged and it was deemed an accident. We lost all of our belongings and there was about $70000 worth of damages to the building. The landlord is being so good to us and wants us to move back in when the unit is repaired as we are good tenants and is letting us stay in the upstairs vacant unit after it gets repaired and cleaned, until our unit is done. We did not have renters insurance as I did not feel it was necessary (boy am I regretting that decision). I am a student living off of osap and 1 shift a week at McDonald's and my bf just got hired full time at minimum wage at staples and works very part time as a bookkeeper for a restaurant. We have no assets and a lot of student debt and everything we owned was lost in the fire. We even owe $10000 on our car. Our worry is that the insurance company may come back and sue us. What can they do to us in our situation? Can they garnish wages even though we are barley scraping by? Nothing has been said yet but it's only been 2 weeks since the fire. Will declaring bankruptcy help our situation? What do we do if they decide to come after us and we have nothing to give?

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    Replies
    1. Hi Mel: Your landlord's insurer may indeed decide to sue you. Sometimes insurers do, sometimes they do not. They will have 2 years from the date of loss to commence legal action against you. Because you have nothing there isn't much that they can do. Having no assets and mostly debt gives them little room to seize anything. They could garnish wages but that would yield very little money. What they might do is simply get a judgment and wait. In time, and perhaps a few years from now you will try to buy a house, purchase something on credit, and you will discover a Judgment against you. Or you will find your credit rating is shot because of this Judgment. At that time you will likely want to contact them to make a deal to pay off the Judgment. Of course, if you never get around to any serious asset accumulation then this Judgment will remain unsatisfied. Certain technical issues will make it difficult (not impossible) for the Judgment to follow you to different jurisdictions. So, if you move far away you might escape a Judgment for a while or forever. A bankruptcy would very likely wipe out any judgment.

      Before considering something as drastic as bankruptcy for this debt wait to see what the insurer does. Many simply don't bother to chase tenants as they know how unlikely it is that they will recover anything. If this insurer does proceed to chase you, save some money for a lawyer, and see if that lawyer can negotiate a deal that you can live with. Insurers, and their lawyers, tend to want to make a deal on a lump sum basis. There are legal reasons that the amount of the repairs are not 100% your liability. Of that reduced amount, the insurer can generally be convinced to look at your assets and resources. A proposal taking into account your assets can sometimes settle a case (which is better than going bankrupt). It can indeed work out to pennies on the dollar of the actual out of pocket repair. The insurer knows, of course, that if they get a massive judgment that you simply can't pay and they push it that you will declare bankruptcy. The effect of that is that the insurer gets zero and is further out of pocket for having paid a lawyer to litigate against you. While that is a consideration don't feel too confident as some adjusters for insurers will indeed pursue the "principle" and pay the money to chase you if they view your conduct as particularly egregious.

      Good luck to you both.

      Michael K. E. Thiele
      www.ottawalawyers.com

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  5. Our building has a new owner and he/she is now requesting proof of insurance. It was in the original contract that we had to have insurance, but it was never enforced. Can they evict me if I do not have insurance?

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    1. Hi: requiring tenant's to have insurance is increasingly common and I've found that landlords are enforcing this lease provision more and more. In theory you can be evicted for not having insurance if your lease requires it. However, my experience has been that the Board is very reluctant to terminate for this reason and certainly has refused termination where the insurance clause has not be regularly enforced. Further, it is the kind of thing that the Board is likely to allow you to cure by purchasing insurance--i.e. not having it in the past will not lead to termination and eviction if you get it now.

      That being said, contracting for the tenant's to have insurance may be a condition of the landlord's own insurance and the landlord may then have a serious legal interest in ensuring that the tenant's are insured. The insurable risk of a landlord's building is lower if all of the occupants(tenants) have their own insurance to cover damage caused by negligence etc. and damages flowing from other persons in the building causing damage to other tenants. Tenants are unlikely to commence proceedings against a landlord (after a flood, fire, etc.) if those same tenants have their own insurance to make a claim against and whose own insurer's are putting them up in a hotel pending repairs. For these reasons I think a landlord's interest in enforcing the insurance clause is significant and I do believe that the Board when shown the importance would indeed terminate a tenancy of a tenant who refuses or who is unable to obtain insurance.

      Michael K. E. Thiele
      www.ottawalawyers.com

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  6. Hi,

    I live in a 3 bedroom townhouse in a co-op housing society in GTA(Durham region). Last week I had a fire in the house. The fire was due to leaving a pan with oil on stove. The fire stayed contained in the kitchen and damage is done on the cabinets. Other damage is smoke damage which is all over the house. I have renters insurance and they will only cover my personal property and any upgrades done in the unit. I was told by my insurance that the landlords own insurance would cover the damage to their property which is the unit. The wall as, carpets, repairs in kitchen , paint etc.

    I spoke to the management of the co op housing and I was told that the fire was my fault and I have to repair the unit. They are not responsible for any repairs.

    Is this true? Would I have to do all the repairs in the unit? What are my options now. I was under the impression that the co-op housing MUST have some insurance to cover various problems in the units.

    Also, management told me that it would take a vERY long time for the unit to be habitable. I can't live in a hotel as I can't afford it. My insurance will cover only upto a maximum amount. That's barely one month with 5 people who need a place to live.

    On top of all this , I will have to pay my monthly rent and utilities of the rented unit while I am not even living there. What are my options? How can I make the management agree to their liability. And fix the unit ASAP!!! Thanks

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  7. Hi - Recently, a pipe burst/ leaked in the upper unit of a set of flats that I own. The water soaked the tenant's bed in the lower unit. The source of the leak is unknown but the tenant believes it was caused by the renovations we were doing upstairs. I disagree since we didn't touch the plumbing. In any case, it wasn't reasonably foreseeable that what we were doing (removing kitchen cabinets and wall panelling) would cause this leak. As soon as I was notified, I arranged for a plumber who diagnosed it as a faulty connection, repaired the drywall, cleaned all of the tenants bedding and did what I could to dry out the mattress. Nothing smells or shows any signs of mold. I have offered to buy him new pillows. The tenant does not have insurance and is insisting that we replace his 1 year old mattress at a cost of $1500. He also refuses to sleep on the bed because he believes it is growing mold deep inside.
    My question is this: Is the landlord responsible in this case? Does it matter what the cause of the leak was? Is this an issue of "quiet enjoyment"?

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  8. Hi, I was wondering if you could help me a little. We own a condo and we pay for the condo insurance but recently we rented out the unit. Now in case like this where we are already paying it do we have to change the status of unit to rental or does my tenant has to get insurance separately for herself meanwhile we pay for the condo.

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    Replies
    1. Hi Salma:

      Whenever you change the use, make a major alteration, or some significant event happens in relation to your condo unit you should seriously consider advising your insurance broker of that fact. Most often, the safer than sorry answer will be to advise your insurer of what has happened. The reason is that a change of use, or other material changes or events can change the "risk" associated with the condo unit. The insurer is insuring your unit on the assumption of certain facts and a certain "reality". When you change the unit from owner occupied to tenant occupied the risk profile of the unit changes. The insurer may refuse to insure or may require higher premiums to insure the property. The failure to inform your insurer of any material changes may ultimately result in a refusal to honour a claim that is made. Before that happens, speak to your broker and even review your policy for your reporting requirements. The fine print of your policy does normally indicate what you have to tell your insurer about.

      Good luck

      Michael K. E. Thiele
      www.ottawalawyers.com

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IMPORTANT NOTICE

Any answers provided are intended to reflect the Law of Ontario, Canada. The answers are not legal advice and no one should rely on the answers provided as legal advice. The answers are intended to be general information about Ontario Law and are the personal view of the author based on the limited facts provided to the author. The answers may not be legally accurate and may indeed be contrary to the law of Ontario. Answers and conclusions drawn may have been different if facts had been shared that have not been disclosed in the comment/question. This blog is intended to assist people in learning about Ontario Landlord and Tenant Law. However, if you have actual legal problems this blog should under no circumstances replace proper legal advice obtained by retaining a lawyer or licensed paralegal to advise you. Nothing in this blog, comments submitted or answers provided, gives rise to a solicitor and client relationship. Comments are published as submitted and commenters should be aware that if they identify themselves in a comment that their identity will become public upon the comment being published. Comments that have been published may be deleted upon request to the author.

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About Michael Thiele

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Ottawa lawyer and partner at Quinn Thiele Mineault Grodzki LLP.  Graduate of Queen's University in Kingston, Ontario.  Called to the bar in Ontario in 1997.  Undergraduate degree at Colby College, Waterville Maine, U.S.A.