I’m not writing about the usual lease issues like, “Can my landlord charge me for carpet cleaning?” My topic is far more dramatic – to the tune of hundreds of thousands of dollars.
When you move into a rental, you don’t expect to end up with a large monetary judgment against you. Here’s how it might happen.
You go away for winter break, turn the thermostat down or off in order to save on utility bills. The pipes freeze, break, and water gushes for days before anyone notices.
Or, it’s summertime. You place a fan in front of an open window to bring in the cooler evening temperatures. The wind kicks up, knocks over the fan and a fire is started.
In either case, there is extensive damage. Your landlord submits a claim to the landlord’s insurance company. The insurance company pays, then turns around and sues you for reimbursement. This practice is called “insurance subrogation.”
Current Colorado case law says that if the landlord has a claim against you for negligence under the wording in the lease, the insurance company has the right to “step into the shoes of the landlord” and sue you for reimbursement.
There are two things you can do to fix this problem. You should do both.
First, immediately go out and buy renter’s insurance. The cost can be as little as $125 per year. According to Brad Bischoff, an agent for State Farm Insurance, if you buy auto and renter’s insurance from State Farm, you may be entitled to a discount on the auto insurance that will nearly pay the renter’s insurance premium.
Under the “liability” portion of a renter’s policy, you would be covered in the situations I described above, and many others. A renter’s policy will also pay for your belongings lost to fire, theft or other incidents. This is important, because most leases insulate landlords from any liability for your belongings, regardless of landlord fault.
The second thing you must do is negotiate protective language in your next lease. The Colorado Court of Appeals says that if the lease makes it clear that you and the landlord do not intend to allow insurance subrogation, it will not be allowed. Insist that the landlord include the following language in the lease:
“Notwithstanding anything else in this lease, landlord and tenant do not intend that insurance subrogation be allowed. If tenant is negligent in causing damage to landlord’s property, tenant’s liability in the event landlord’s insurance company pays for the damage, shall be limited to landlord’s deductible, co-payments, and any other out of pocket costs landlord can prove, and nothing more.”
You assure your landlord that this clause is fair to the landlord as well as the tenant. If your negligence is the cause of the damage, you will be responsible for all the landlord’s out-of-pocket costs. Your landlord will be made whole. You just won’t pay the insurance company back. This is fair. Part of your rent helps the landlord pay the insurance premium that protects the property. That makes you, in effect, a “co-insured” under the policy – you should benefit from the policy, not be stabbed in the back by it.
There are many other snares in leases that can be corrected. Before you sign any lease, let Student Legal Services review it. The service is free to those of you who pay student fees. It could save you lots of money and headaches.