Do you own an apartment building or other habitational property? Are you looking to buy a commercial investment property in California that includes habitational living space (whether mixed-use or strictly habitational)? If so and if you will be renting to tenants, there is a property insurance exclusion you should be aware of on some lessor’s risk policies called the commercial habitability exclusion.
The habitability exclusion excludes liability coverage from claims arising from alleged or actual violations of any health and safety, civil or federal law as it pertains to habitability. In California, the California Civil Code is very specific in outlining the standards expected for a tenantable living space. From the perspective of the insurance companies, this means providing a safe living environment that is fit for occupancy by human beings in a sanitary, healthy, habitable and tenantable condition. Simply put, insurance carriers will not cover claims arising from poor upkeep of apartment buildings.
This exclusion also excludes all associated legal defense. If an insurance carrier is aware that you have been negligible in maintaining your property, they will not defend you in a related claim.
As a rental property building owner, you should always keep your buildings up to livable standards. Simple steps to do this include consistent pest control, waste management services, and staying up to date on local health codes. If you would like us to review your current policy or need commercial property insurance, please contact us today.
“Apartment Building Owners – beware of dangerous insurance issue!” (2011). Walsh Carter Insurance Blog
California Legislative Information, “California Civil Code 1941.1”