July 13, 2024


The Intersection of Information and Insight

Legal liability – what it is and why you need it

6 min read

$20 million… $30 million…

No, it isn’t the lotto jackpot.

It’s the amount of ‘legal liability’ cover likely to be included in a landlord insurance policy.

The sums represent lots of zeros, but just what is liability cover and why do landlords need a cover with seven figures?

Landlord insurance policies cover a lot of risks faced by landlords, from damage and loss resulting from ‘perils’ like bad weather and theft to loss of rent.

But there’s one inclusion that most don’t really think about – until they have to.

And that’s legal liability (it may be referred to as ‘public liability’ or ‘liability to others’).

So what exactly is liability?

According to Black’s Law Dictionary, liable means ‘responsible or answerable in law; legally obligated’.

The Cambridge Dictionary says it’s the ‘responsibility that someone has for their actions, for example, the responsibility to pay another person for harm or damage that is a result of these actions’.

Or to put it in the vernacular of one of those TV courtroom shows: ‘It’s your responsibility. And you have to pay for it.’

Basically, if a person is responsible for something happening, then they are liable for compensating the injured party.

What does it mean for landlords?

Landlords have an obligation or duty of care to provide a safe and habitable property for tenants and any person who is legally on the premises such as guests, delivery people, tradies, property managers, utility meter readers or other visitors like charity collectors.

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Note: Trespassers, including burglars, are people who do not have permission or a lawful right to be on a property. Owners and occupiers of a property generally have no duty to protect trespassers from dangers.

If a tenant or a visitor is injured or has their property damaged while they are on the premises, and the reason for that loss can be attributed to the landlord (i.e. is the result of something that the landlord reasonably shouldn’t or should have done), then the landlord is likely to be responsible for compensating them for that loss.

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Note: Tenants also have an obligation to ensure the property is safe for anyone who is legally on-site. If the tenant’s action, or inaction, leads to damage or another person being injured on the premises, they can be held liable. This is known as occupier’s liability and is not covered by the landlord’s insurance. Tenants need their own renter’s insurance with legal liability cover.

Why a seven-figure cover?

Cover in the tens of millions might seem like a bit of overkill, but there’s a reason why the limit is so high.

And that’s because legal liability claims can easily stretch from tens of thousands to hundreds of thousands or even millions of dollars.

Just think about…

There could be the cost of medical treatment, rehabilitation, loss of earnings, pain and suffering, and legal fees – these can very quickly add up.

In the event of a life-altering injury or death, there is also the potential for lifetime medical costs and care or a lump sum payout.

What are landlords liable for?

Landlords must take reasonable care to avoid the foreseeable risk of property damage or harm to their tenants and other visitors to the property.

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