VIC Tenant Damage

The tenant told PM there was a fire damage on the property caused by the tenant (small accident) and my PM is asking whether I can lodge a claim with the insurance company with the tenant paying the excess given the costs involved.

I can understand why PM made this recommendation, but this would be my second insurance claim in a year and I am concerned about next year's insurance premium or worse still, if the insurer decides not to renew the insurance.

What do people recommend in this situation? Is there an alternative to lodging an insurance claim?

 

I would expect that any alternative would cost you more than you will save in premium increases.... with the possibilty you still dont at anything out of them anyway.

Someone else might offer a suggestion, but at least this way the excess is paid and the damage repaired.
The question has to be asked though what's the point in having insurance in the first place if you cant afford to claim on it?

 

A insurer on renewal may expect you disclose the fire even if no claim is made. Premium renewal may be based on the events whether claimed or not. You may put the policy ar risk on a third fire. Insurance is for a loss. A tenant might dispute paying the full loss where you elect not to seek a claim for a part of your loss. The tribunal may agree with them. If the premium rises it could be a reason to raise their rent. Loss of no claim discounts is something that can happen.

The tenant may find their loss is more than the excess if the insurer discounts the cover for fair wear and tear. Take care with agreeing to "the excess".

 

Fair enough, I guess it's a cost of renting out the property. I will lodge a claim with the insurance company, although I don't like my odds of increasing the rent due to covid, at least I will increase my negative gearing on the property!

 

Asking the tenant to pay the excess is almost certainly a bad idea. It could invalidate your insurance.

 

Also if insurance finds another party (tenant) at fault they may try to claim these funds from the other party anyway.

 

COVID has made a lot of rental availability scarce v a year ago. Whether the tenant is affected is another issue and if they are they may have little negotiation available. The triple whammy of rising rents and falling availability and the move to allow evictions could see some rents rise. Sale prices and clearance rates are also showing promise.

 

So what are my options? Do I just have to wear the entire excess myself?

I know for car insurance I am not liable for excess if it can proven the third party is at fault, would I be able to not pay the excess if tenant own up to the damage?

Will they? I thought insurance will only chase the tenant if the damage is deemed to be malicious or at least negligent?

I am getting quite confused now, maybe I will call my insurance company using a private number and ask them a few what if scenario (such as whether the tenant can pay the excess on my behalf).

On a related note, should I ask the tenant whether they have contents insurance? Contents insurance should cover tenant for accidental property damage right?

 

Yes probably. You otherwise have the option of not using your insurance and trying to do the whole legal financial claim against the tenant yourself (assuming they are even liable to you - this isn't necessarily guaranteed).

When you use insurance, you're basically asking them to step into your shoes in exchange for a payout. Often an excess is a bargain!

 

Ask for a quote to repair without using insurance and compare versus the insurance?
also, I'm glad the tenants didn't accidentally burn the house down or get injured.
I hope this helps,

 

Why did the PM make this recommendation? Was the first insurance claim also due to tenants damaging property?

I don't understand why you or your insurance is even in the picture? The tenant damaged the property, at the end/termination of the lease the property needs to be handed over to you in the condition that the property was provided in (with reasonable wear and tear - fire accident isn't reasonable wear and tear!). At regular inspections there has to be a record of the property's condition. If the damage isn't fixed, it comes out of the bond. If the damage is beyond the bond amount then pursue legal recourse.

 

The excess may be your "loss" to a valid claim event. Asking the tenant to contribute the amount of the actual loss limited to the excess seems perfectly OK. Many tribunal decisions reflect this as a financial "loss" to the owners. But to ask the tenant to pay the actual loss if its insured would be dubious. I would also be paying the excess to the insurer myself so that the owners loss is evident. The tenant shouldnt be dealing with the insurer or paying the excess to the insurer.

 

No no no. If anything the other way around.

Asking tenants to cover your excess might limit their liability to the excess. Which is a bad thing because you would be shooting your insurer's ability to claim from them in the foot. Insurers don't like that, and technically speaking, it can void your insurance.

Meanwhile it's fairly settled law that a person that is insured does not have to use their insurance as a argument for mitigating their loss.

 

Ahh good reasoning. So the owner is liable for the excess....if they claim. But they dont have to claim and could stick the whole cost to the tenant...if they have financial capacity which may become a higher concern for severe loss or damage vs incidental minor damage. The insurer may be a safer outcome to avert that risk. But if they do claim they likely cant pursue any of the same loss with the tenant.

I have a client (actually two had it occur) whose tenant burnt the house down (deliberate domestic violence issue) and I recall they found the excess a minor cost for its outcome as they had zero chance of getting the cost from the tenant (who was charged).

 

Yep you nailed it in one here. Basically an insured has a choice to either leave the whole thing with their insurance, or try to do it all themselves.

Almost certainly, an excess fee is a bargain compared to the costs/risks/hassles of trying to DIY the legal stuff involved otherwise.

 

Legal guidance is always better than not obtaining it. Good lesson.