Your Home May Be Your Castle, But Your Rental Unit Is Not

When residents reach beyond the four walls they lease, landlords need full protection under insurance policies.

When Tenants Reach Beyond the Four Walls they Lease, Landlords Need Full Protection Under Insurance Policies

By Rhonda D. Orin, Anderson Kill & Olick

The rental market for residential housing is an unexpected beneficiary of the nationwide mortgage crisis. Demand for rental housing is at a high, with rental units filled with one-time homeowners who recently lost their own houses to foreclosure.

Many of these new renters have long been accustomed to using their living areas as they see fit. As homeowners, they could – if they chose to do so – take advantage of spaces under floorboards, behind drywall or in between ceiling joists. Except for highly unusual situations, their homes were their castles.

Not so, though, for the renter. In most apartment leases, renters are entitled only to the private use and enjoyment of the space within the four walls, along with access to common areas. Some leases include details about how pictures can be hung, what paint colors can be used and what type of lawn furniture (if any) can be placed in outdoor spaces. But the underlying premise is that the skeleton of the building itself—the drywall, the floorboards, the ceiling joists and the pipes and wires in those spaces—remain, at all times, the property of the landlord.

Usually, when something goes wrong, it’s not too hard to figure out who is responsible for what. If a flood damages multiple rental units, did the water come from an exploded pipe? Time for the landlord to call its property and liability insurance companies.  Did it come from a faucet that a tenant forgot to close?  Time for the tenant to get on the phone.

But the questions get trickier when tenants, in the privacy of their rented apartments, invade their landlords’ legal spaces. What about the tenant, for example, who pulls back the floorboards in the living room and uses the cavity underneath for the storage of paint cans or other potentially hazardous substances?  Or the tenant who keeps his gun “safe” by stashing it behind a hole he made in the drywall?  And what about the tenant who grows mushrooms in the basement, which starts mold growing throughout the building?

If such out-of-the-ordinary actions – which can and do take place—eventually cause third-party injury or damage, whose insurance company should get the call? While the landlord’s insurer may fire off a quick denial, advising the landlord that the tenant is solely responsible, in many cases that insurer is squarely on the hook.

The Landlord’s Property Policy

The property policy that is on the risk when the damage is discovered is likely to be first in line, from the landlord’s perspective. The typical insuring agreement covers:

-direct physical loss of or damage to Covered Property caused by or resulting from any Covered Cause of Loss (emphasis supplied).

-Loss of income usually is covered as well through a Business Income

 (Without Extra Expense) Coverage Form:

the actual loss of Business Income you sustain due to the necessary “suspension” of your “operations” during the “period of restoration.”  The “suspension” must be caused by direct physical loss of or damage to property . . .  [and the” loss or damage must be caused by or result from a Covered Cause of Loss (emphasis supplied).

Typically, property policies cover all risks of loss unless specifically excluded. Some, however, incorporate definitions of “Specified Causes of Loss,” such as:

fire; lightning; explosion; windstorm or hail; smoke; aircraft or vehicles; riot or civil commotion; vandalism . . .

In many examples, such as the ones cited above, landlords can make strong arguments that the actual cause of their losses was vandalism, if they are held accountable for coming up with an explanation at all.

For example, vandalism was the reason found for coverage where tenants had operated a methamphetamine lab in a rental property and created the need for an environmental cleanup; where a tenant’s practice of growing marijuana in the basement of a rented house led to a mold problem; and where asbestos was scattered throughout a rental property by unknown persons who disturbed bags that had been sealed properly by asbestos-removal contractors.

Although the dictionary definition of vandalism includes an element of malice, that element has been found to be satisfied within property policies by evidence of wanton or intentional disregard for the rights of others, such as actions taken by tenants in conscious or intentional disregard of the owner’s property rights.

Defenses such as the pollution exclusion are not likely to prevail because an increasing number of jurisdictions, like New York, reject the application of the pollution exclusion to indoor releases of contaminants, as opposed to releases into the atmosphere.

Further, even if pollution were a contributing cause of the loss, along with vandalism, and even if the pollution exclusion could be applied to such indoor releases, still the exclusion would not bar coverage when the “proximate,” or principal, cause of the loss is vandalism.

The Landlord’s General Liability Policy

If a tenant invades the skeleton of the building and ultimately causes injury to other tenants or third-parties, the landlord’s general liability insurer may be on the hook as well. That policy may provide defense costs and indemnification to landlords who are sued by third-parties for bodily injury and property damage that they suffered as a result of the tenants’ invasive actions.

Landlords should expect their liability insurance companies to raise the very same defenses about causation and exclusions that would likely be asserted by their property insurance companies, as discussed above. For the same reasons, though, these defenses ultimately should fail.


When tenants do things that they are not supposed to do, like reach beyond the four walls of the units they are renting, assessing responsibility can get very complicated very fast. A landlord’s insurance coverage, however, usually is far more substantial than the tenants’ personal resources or the insurance they may have purchased for their units. Landlords therefore should appreciate the need to make every effort to protect their own interests. While their first instincts may be to contact the offending tenants, they also should give notice immediately to all of their own insurance companies, even including former insurers that could possibly be on the risk.

Rhonda D. Orin is the managing partner of the Washington, D.C. office of Anderson Kill & Olick. She has decades of experience representing policyholders against insurance companies in property and liability insurance coverage actions across the country, including real estate disputes.