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COVID-19 eviction moratoriums may soon expire, raising the specter of wrongful eviction lawsuits nationwide. Just as troubling is a growing number of million-dollar jury awards in lawsuits over apartment complex owners’ alleged failure to maintain “habitable” properties.
Concerned by the potential for habitable property litigation to spread, insurers are adding exclusions to limit their risk.
Some carriers have already added exclusions for cockroach and bedbug infestations, and now broader, generalized habitability exclusions are becoming more common.
Habitability suits have been filed over conditions such as faulty and dangerous wiring, pest and vermin infestation, peeling paint, faulty weatherproofing and even “lack of general maintenance.”
To protect themselves, property owners need to take a proactive approach to maintenance of multifamily units and keep detailed records of that work.
Not only are more suits being filed, but verdicts that may have been considered extraordinary five years ago are now seen as the norm. Typical awards in habitability cases have risen from $15,000 to $25,000 per plaintiff to $75,000 to $100,000 per plaintiff.
Driving Forces
Several trends are helping to drive the higher awards.
- Juries, especially in California’s major cities, have become more judicially active, particularly in cases involving corporate landlords in areas suffering from a shortage of affordable housing.
- Also, rents in the bigger cities have soared in recent years, leading to more overcrowding, which can create conditions more conducive to vermin infestation.
- Another contributing factor are statutes in some areas of the country that allow for recovery of attorney fees in certain habitability claims. Insurers are concerned not only about the size of the awards, but also the steep defense costs for cases involving multiple or even dozens of plaintiffs.
While some of these habitability lawsuits may be warranted, many are not.
Unscrupulous law firms have been known to file these lawsuits on behalf of tenants who may be living in older rental properties that need everyday repairs. These shady law firms are also encouraging tenants to stop paying rent and promising them that there will be a hefty award.
All of this helps explain the move to add the array of exposures we’re seeing, including those for “fungi and bacteria,” which not only restrict coverage for bodily injury or property damage but also for expenses associated with abatement, testing, monitoring or remediation of these conditions.
Coverage also is being precluded for violation of any federal, state or local laws, ordinances, statutes or health codes, and failure of the insured to maintain premises in a safe, sanitary, healthy or habitable condition.
Because these habitability exclusions are relatively new, it’s not quite clear yet how stringently they can be applied. Nonetheless, the growing number of habitability cases in our court system means that property owners will have to take a proactive approach not only regarding maintenance but also in keeping detailed records of that maintenance. That should include hiring professional exterminators to maintain pest control on a regularly scheduled basis.
Eviction Rules
Regarding evictions, once the moratoriums are lifted, there are several steps to doing it right; failure along the way is a violation of the law. Typically, landlords need to:
- Serve the tenant with appropriate notice based on your state’s laws.
- File an eviction action with the court, and serve the tenant with the complaint and summons.
- Provide appropriate time to allow the tenant to respond to the complaint.
- Receive a judgment on the eviction.
- Remove the tenant (legally). Local law enforcement can help with this process.
Don’t forget: retaliation eviction also is illegal. In other words, landlords who try to evict a tenant in retaliation for filing, say, a habitability complaint against them with a government agency are breaking the law.
The Mahoney Group, based in Mesa, Ariz., is one of the largest independent insurance and employee benefits brokerages in the nation. For more information about apartment complex insurance coverage, contact us online or call 480-730-4920.
This article is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.