The New Bedford Police Department raided and searched a rental property. The raid resulted in the arrest of the drug dealer and the seizing of his stash of drugs and money, but it also resulted in considerable damage to the rental property. Doug, the building owner, filed a claim with Manufacturers and Merchants Mutual Insurance Company for more than $17,000 to pay for repairs. The claim was denied, so Doug headed for the courts.

Click here to see how the courts ruled.

All commercial and personal lines property policies contain an exclusion that excludes coverage for the seizure or destruction of property by order of governmental authorities. The only exception is the destruction such authorities use to prevent the spread of a wildfire and that applies only when the type of fire being prevented would have been a covered loss under the policy.

Click here to read the PF&M analysis of the ISO Businessowners Policy Primary exclusions.

A building owner's lease is important, but it may be of no use when a drug user occupies it. When the person using the building for illegal activity leaves by choice, eviction or by arrest, the property damage that was the result of that tenant's use is often not covered. The building owner is often left with uncovered damage and a tenant from whom it cannot collect reimbursement.

Click here to review two e-marketing articles explaining the consequences to the landlord of meth use by a tenant that you might want to include in a newsletter or as a blog.

There are no standard endorsements available to remove the Civil Authority Exclusion. This means that it is a risk that must be carried entirely by the named insured. Your client may believe that between the lease and the insurance policy all risk associated with tenant occupancy has been successfully transferred. A judicious reminder may be helpful so that your client can take loss prevention methods, such as periodic and irregularly timed visits to rental properties.

Click here for some wording you could use to set up a time to discuss this important issue with your rental property clients.