What You Need to Know About Property Management Company Risks

Even with a well-drafted contract in place, property management companies may be exposed to significant liability. Managing non-owned commercial or habitational properties carries insurance risks that are often misunderstood or overlooked. When it comes to assault and battery, firearms, or even animal-related incidents, missing or inadequate coverage on either the property manager's or the asset owner's policy can result in serious financial consequences.

Following are key areas you should be watching.

Contracts Do Not Equal Coverage

Property management companies typically operate under written agreements, providing services for a flat fee or a percentage of revenue tied to the asset. These contracts are important but not a substitute for properly structured insurance. Too many firms assume that a hold harmless clause or indemnification agreement is enough to shift risk. In reality, these provisions are frequently challenged in court and may not hold up, particularly when serious bodily injury, violence, or firearms are involved.

The Risk of Relying on the Named Insured’s Policy

One of the biggest issues we see is an overreliance on the asset owner's insurance policy. Property management companies often believe they are protected if the building owner has a general liability policy. However, many of these policies exclude critical exposures such as:

• Assault and battery
• Firearm-related incidents
• Animal attacks

In fact, some carriers writing coverage for property management firms may void the policy entirely if the Named Insured's policy does not include these specific coverages. This leaves the property management company exposed despite believing it was protected.

Why the “Real Estate Managed” Endorsement Matters

Every property management company’s policy should include the “Real Estate Managed” endorsement. This endorsement is a key coverage enhancement that helps clarify the insured’s role as a third-party manager and can significantly reduce ambiguity at claim time. It also typically ensures that the property manager’s policy functions as excess over the owner’s insurance.

Importantly, this endorsement should come with either full limits or, at minimum, sublimits for Assault and Battery and Firearm coverage. It’s also important to verify both the presence of the endorsement and the adequacy of its limits.

Subcontractor and Independent Contractor Exposures

Most property management firms rely heavily on subcontractors and independent contractors to handle maintenance, security, landscaping, and more. If these vendors are not properly insured or the property manager fails to collect and verify up-to-date Certificates of Insurance, the liability for their actions could shift back to the property management firm.

Your insurance program should include protocols for vendor insurance verification and clear risk transfer language in contracts that are reviewed and supported by your broker or legal team.

Don’t Rely on Assumptions

To reduce exposure and protect your organization, consider the following steps:

• Review your contracts to understand what protections are contractual versus what must be supported by your insurance.
• Verify the presence of the “Real Estate Managed” endorsement on your policy and ensure that Assault and Battery and Firearm coverage are included at meaningful limits.
• Confirm that asset owners maintain the appropriate policy coverages, particularly for high-risk exposures.
• Audit subcontractor agreements and COIs regularly to ensure you are not unknowingly inheriting risk from third parties.
• Work with a broker who understands these risks and can help build a layered program that aligns with your operations.

We Can Help

At AssuredPartners Real Estate, we help property management companies and their insurance partners stay ahead of risk with tailored strategies that address the real exposures of managing non-owned assets. If you are unsure about the structure of your current policy or concerned about potential gaps, we are here to help you navigate these issues with clarity and confidence.