Who Covers Damage to a Rented Venue?
Special times with family and friends occasionally means taking a special family vacation, renting a country club for a party or wedding, or hosting an event at a local venue. On those occasions, you want to be sure the events are not ruined by an insurance issue. One big issue to consider is your responsibility for damage to the rented facility. Which begs the question, Who Covers Damage to a Rented Venue? The personal liability insurance provided by your homeowners insurance excludes damage to property that is rented to, occupied or used by you or in your care, custody or control. One exception to this exclusion provides coverage for damage by fire, smoke or explosion. That’s a big exception, because those causes of loss are probably the most likely to occur. However, you will be personally responsible for other types of damage caused by you or your guests and your homeowners policy won’t help. Most umbrella liability policies contain the same exclusion and also won’t help.
Consider these examples:
- Water damage caused by an overflowing tub, toilet or sink;
- Damage to a mountain cabin caused by a bear that gained entry through an unsecured door or window; or
- Damage to a wedding venue caused by a bunch of rowdy party guests.
The owner of the facility is going to expect you to pay for the damage. Here are the words used in an agreement for a vacation home recently rented through the popular service HomeAway: “As renters, you assume all responsibility for any damage that occurs to the property and adjacent common areas as a result of your rental.”
Even if the owner of the facility has insurance to cover the damage, the insurance company has a right of legal action against you to recover its loss payment. (This is called “subrogation.”)
So what can a family do to protect itself from legal responsibility for damage to a rented venue? Here are three ideas.
- You can purchase a special event policy that covers all kinds of damage to the rented facility, as well as other things. The problem with this type of policy is that it typically provides a limit of only $1,000,000. That may not be enough. InDallas, for example, we have a flight museum that has property values in excess of $10 million. A policy with a limit of $1,000,000 in no way covers the potential claim.
- Some personal umbrella liability policies cover damage to rented property with a small deductible. Ask your SwingleCollins agent if such a policy is available for you. And be sure to consider purchasing a high limit of liability.
- The best solution is to require the venue to waive the right of their insurance company to subrogate against you. Most commercial property insurance policies allow such waivers if they are in writing and executed prior to a loss. The waiver can be added to the rental agreement or drafted as a standalone document. Ask your attorney to assist you with the appropriate wording.
Feel free to call your SwingleCollins agent if you have any questions about or need clarification on the points presented in this article.
Swingle, Collins & Associates specializes in personal property and casualty insurance coverage in Dallas, Southlake, Highland Park, and Plano for affluent families and high net worth individuals. The descriptions of coverage listed on this website are brief and subject to the provisions, limitations, and exclusions that can only be expressed in your policy and related endorsements. For additional information of how Swingle, Collins & Associates can assist in meeting your coverage needs for property and casualty insurance please contact your dedicated risk manager to discuss the benefits and services of personal homeowners insurance coverage.
The information contained on this page is provided for informational and educational purposes only. It contains general information on insurance issues and may not reflect the most current developments in insurance coverage and is unlikely to apply in all factual scenarios. The information does not include all the terms, coverage, exclusions, limitations or conditions that may be contained in the actual insurance contract language. The policies themselves must be read for those details. Sample policy forms will be made available upon reasonable request.