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Q&A Regarding Renter's Insurance

renter's insurance

Q: Despite agreeing to it in our lease, a tenant won’t purchase renter’s insurance. Is this legal?

A: Yes, it is most likely permissible for a tenant to refuse to comply with a lease clause requiring the tenant to purchase renter’s insurance – but the effect on owners is not as alarming as you might think. There has long been an assumption that, since the tenant signed a lease that includes a provision requiring them to obtain insurance for their personal property in the unit, the landlord can enforce that provision. Many form leases, including those published by California organizations, contain a clause requiring the tenant to purchase renter’s insurance. A brief online search for whether California owners can require tenants to purchase insurance results in numerous web pages that unequivocally state owners can and should do so. But the people posted those web pages must be unaware of a 2016 appellate decision in which a Los Angeles court decided an owner could not evict a tenant for failing to obtain renter’s insurance.

In Boston LLC v. Juan Juarez, published February 25, 2016, the Court of Appeals for the Second District of California held that a tenant’s failure to obtain renter’s insurance in violation of a lease clause is not a material breach permitting the landlord to terminate the tenancy. The Court reasoned that the requirement to purchase renter’s insurance protected the tenant’s interests, not the owner’s, so the failure to obtain renter’s insurance did not harm the owner and was not a material breach of the lease permitting termination of the tenancy.

It remains to be seen, however, whether this decision will be applied in all situations. The facts of the Boston LLC did not favor the owner: Mr. Juarez lived in the apartment for over 15 years before Boston LLC served him with a three-day notice to comply with the insurance clause. The notice was served on Friday, February 14, just before the three-day weekend for Presidents’ Day, February 17, a legal holiday, and Mr. Juarez obtained the required insurance on February 21. In addition, Mr. Juarez did not make any claim against Boston LLC that would have been covered by renter’s insurance had Mr. Juarez procured it. These facts undoubtedly played a role in the Court of Appeals’ decision, although the holding itself does not limit the application of the decision to similar fact situations.

The Boston LLC Court of Appeal also noted that the Los Angeles Rent Stabilization Ordinance is meant to protect tenants from excessive rent increases and prohibits owners from terminating tenancies without an approved basis (just like the San Francisco Residential Rent Stabilization and Arbitration Ordinance). Therefore, a breach that had no negative effect on the owner was not a valid ground for forfeiting the lease.

This does not mean your lease should be silent regarding renter’s insurance. Some leases state the tenant is advised to obtain renter’s insurance and, if the tenant does not do so, the tenant waives the right to seek damages against the owner if the tenant’s personal property is damaged or destroyed. Such a clause is more likely to be enforced than one resulting in forfeiture.

© 2019 by Fried & Williams LLP. All Rights Reserved. The information contained in this article is general in nature. For advice on any particular matter, please consult with our attorneys because the facts of your situation may be unique and the law changes from time to time.

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