Four Measures To Better Manage Liability Claims

There’s no relief in sight to the serious affordability crisis in U.S. housing, and rental providers and renters alike are feeling the vise further tighten due to high insurance costs. 

Property insurance saw some stabilization in 2024, with rates declining for the first time since 2017, according to the National Multifamily Housing Council (NMHC). In its “2024 State of Multifamily Risk Survey and Report,” though, it stressed that liability lines remain under pressure, and providers should take steps to adapt.

The outlook for liability rates, though, is something of a moving target, given the potential impact of unexpected events like catastrophic weather-related events. Other factors lead to an uncertain outlook as litigation verdicts continue to rise, impact premiums and put pricing pressure on even those properties with lower risk histories. 

Washington state’s property management community will be challenged to step up their liability risk management efforts to protect their resiliency, finances and reputation. Here are four suggestions for sharpened practices.

1. Be prepared for high-risk claims.

Certain types of claims pose unique and particularly problematic risks. Those involving serious injury, third-party property damage and regulatory attention are among them. The best way to minimize damage is through fast, informed responses. This is best achieved by identifying potential serious risks and developing protocols for reporting incidents immediately, collecting critical documentation and monitoring progression. Leveraging your insurer in the response will not only minimize the financial impact, but protect the organization’s reputation. 

2.  Make documentation and reporting a priority.

A successful claims process hinges on detailed and complete documentation, reported to the carrier in a timely way. Detailed documentation – incident reports, statements and other supporting documents – and streamlines claims processing as it speeds the insurer’s decision-making. Documentation must be accessible and accurate.

3. Get familiar with policy coverage particulars.

Liability policies are marked by specific terms, coverage limits and exclusions; different policies can have unique conditions. What you don’t know can result in unexpected coverage gaps. Coverage should be assessed with a risk advisor to ensure it aligns with your business risks. Some particulars to look for:

• Whether policies are occurrence-based or claims-made. The former type requires incidents to happenwithin the police term, providing longer-term security but higher initial costs. Claims-made cover only claims made the policy was active and after a specific retroactive date. The premiums are initially lower, and the policy more flexible, but maintaining coverage for incidents reported after the policy’s cancellation can be expensive.
• Common exclusions for specific scenarios are also important to be aware of. These can include intentional misconduct, damage to owned property or contract breaches.

4. Be aware of (and protected against) worsening exposures.

With claim frequency and severity on the rise in cyber and environmental liability, it’s key to understand how liability policies are evolving and the particulars in coverage. For example, multiple policy types now cover cyber liability ((like cyber versus cybercrime) as managing escalating threats grows more difficult. And environmental policies may include third- and first-party coverages for aspects like property cleanup and crisis management. Also, before coverage applies, pollutant levels might have to reach specific thresholds.

What makes a difference in the effective management of liability claims is integrating risk awareness and preparedness into the culture. These measures will strengthen that posture.  

About the author

Andrew Rutherford, CLCS, is Senior Vice President of Commercial Lines at Top 5 insurance brokerage HUB International Northwest.  

He is an active member in the Associated General Contractors of Washington, Associated Builders and Contractors of Western Washington, Masters Builders of King and Snohomish Counties, and serves on the community enhancement board for NAIOP Washington State Chapter. 

Prior to his insurance and risk management career, Andrew worked as the national sales manager for a manufacturer of industrial ventilation equipment and dust collection systems specializing in hazardous and toxic particulate collection. 

The insights gained from the management side and working in two major construction insurance markets has helped Andrew to embrace a big-picture approach to best protect his clients year after year.