Allyson Gold’s excellent article, Insuring Justice, shows that when low-income tenants suffer personal injuries caused by substandard housing conditions, the torts system fails them and protects negligent landlords. While the negligence cause of action applies to landlords’ actions and omissions in theory, low-income tenants face multiple barriers to successful negligence claims against landlords for their injuries. A chief barrier is the lack of liability insurance for landlords. This long-overdue article is the first to examine liability insurance for landlords, particularly for those who rent to low-income tenants.
Prof. Gold brings extensive knowledge of issues and problems facing low-income tenants as well as of insurance, and tort law, to bear in discussing liability for injuries caused by substandard housing. Why, Prof. Gold asks, do lawmakers require Airbnb landlords to have liability insurance for short-terms rentals to tourists, yet they do not require that landlords renting to long-term tenants carry liability insurance? She shows that this disparity is neither inevitable nor justifiable.
While other scholars have focused on the broad relationship between liability insurance and torts,1 and on various areas where the lack of liability insurance affects compensation and deterrence,2 this piece shines light on a huge and significant liability insurance void that prior scholarship has not illumined. Prof. Gold begins with principles of insurance law, explains risk allocation more broadly, reviews statutory approaches to landlord insurance, and finally makes recommendations, advocating mandatory liability insurance for landlords and other reforms.
Setting the table for her later recommendations, she highlights contexts where public policy has justified mandates and where insurance is not left to private individual decision-making. State auto insurance and federal flood insurance mandates are examples of such requirements. Insurance mandates can be “private” as well, she shows, using the example of homeowners’ mortgage insurance, which is sometimes demanded by mortgage lenders as a condition of the loan. However, landlords renting to long-term tenants generally are not required to have liability insurance, she explains. The only exception is the woefully inadequate coverage required for landlords receiving financing under Freddie Mac.
Prof. Gold then turns to the way current law and insurance practices shift risk between landlord and tenant and highlights the harms caused by substandard housing conditions. She has a deeply informed perspective on empirical issues involved in rental housing which is absent in the torts and insurance law literature. She deftly weaves together different sources of data – from broad National Safety Council data, to cases, to government reports, to newspaper articles focusing on electrical safety issues in one Milwaukee neighborhood (predominately Black and poor, with conditions likely to be repeated elsewhere), and more. She thereby creates a nuanced picture of the issues facing tenants injured by substandard housing conditions. She shows throughout and in detail how current inadequate policies and practices fall disproportionately on low-income racial minorities.
There is a chasm, she explains, between the legal rights that tenants in many jurisdictions have to demand repairs and tenants’ inability to actually make repairs happen. In part because of this chasm, the substantial risks of physical injury that substandard housing creates simply endure and worsen, unaffected by tort suits. Further, insurance companies often serve as private risk managers, for example, instructing homeowners how to reduce fire risk in fire-prone areas or varying rates based on risk; when rental properties lack liability insurance, these safety-promoting functions are absent.3
Without liability insurance, judgments for injuries are very likely to be uncollectable, or at least, very difficult to collect because properties are often owned by shell companies, and assets are hard to track down. With no potential payor, injured tenants will not be able to retain lawyers on a contingency fee basis. Prof. Gold carefully shows how insurance policies available to tenants and landlords cover less harm than policies available to homeowners. For example, renters insurance does not cover medical expenses.
The article offers a sophisticated discussion of insurance coverage barriers that draws on history, information from private regulatory bodies like the National Association of Insurance Commissioners, empirical studies, and legal scholarship. Prof. Gold insightfully demonstrates how “given the conditions of rental housing stock, homes and occupants that are most in need of [insurance] protection may be the most difficult to insure, leaving tenants vulnerable to harms from personal injury and property damage.” (P. 42.) She reviews and compares statutory approaches, asking which party should bear the risks of harm, time, and expense of injuries arising out of rental housing. The article’s argument that the current system is contrary to public policy is persuasive.
Prof. Gold makes two main recommendations. The more modest one is a disclosure regime requiring landlords to disclose their insurance or lack of it to tenants. While not ideal, this would be an improvement over the current lack of transparency which disadvantages tenants. The other, more far-reaching reform is to require landlords who are renting long-term (30 days or more) to have liability insurance, similar to the Airbnb requirement mentioned earlier. Such a mandate, she memorably states, would “place legal residents on equal footing with tourists.” (P. 53.) This change could result in more compensation for injuries and potentially more deterrence of unsafe conditions, depending on underwriting and various factors.4 Rhode Island recently passed a first-in-the-nation law requiring liability insurance for landlords; its impacts are sure to be studied for reform efforts elsewhere.
Public policy justifications for insurance mandates have been successful in contexts like auto insurance and equally apply here, she argues. While opponents may argue that mandates will disrupt the rental market or lead to additional costs, Prof. Gold notes that similar concerns were raised when courts began to recognize implied warranties of habitability, yet the bad outcomes predicted in that context have not come to pass.
She also argues that other reforms, such as Rochester’s ordinance requiring lead inspections of rental properties and correction of lead hazards, have not caused significant costs to landlords or disruption in the rental market. The author’s analysis of insurance mandates might benefit, in future scholarship, from discussion of the literature addressing the pros and cons of mandates in different contexts.5 The current situation, so comprehensively analyzed by Prof. Gold, urgently calls out for attention and reform. This article is a huge contribution that hopefully will lead to reform, as well as to more scholarly attention to the many issues it raises.
- See generally, Kenneth S. Abraham, The Liability Century: Insurance and Tort Law from the Progressive Era to 9/11 (2008); Tom Baker, Liability Insurance as Tort Regulation, Six Ways that Liability Insurance Shapes Tort Law, 12 Conn. Ins. L. J. 1 (2005).
- See, e.g., Merle H. Weiner, Civil Recourse Insurance: Increasing Access to the Tort System for Survivors of Domestic and Sexual Violence, 62 Ariz. L. Rev. 957 (2021); Rick Swedloff, Uncompensated Torts, 28 Ga. St. U. L. Rev. 721 (2013); Jennifer Wriggins, Domestic Violence Torts, 75 S. Cal. L. Rev. 121 (2001).
- See, e.g., Protecting Your Home from Wildfires, USAA (May 27, 2022); Omri Ben-Shahar & Kyle D. Logue, Outsourcing Regulation: How Insurance Reduces Moral Hazard, 111 Mich. L. Rev. 197 (2012).
- See, e.g., Ben-Shahar & Logue, supra note 4.
- Mandates are not a perfect solution to the problems they aim to fix, but there are no perfect solutions. See generally, Jennifer Wriggins, Mandates, Markets, and Risk: Auto Insurance and the Affordable Care Act, 19 Conn. Ins. L. J. 275, 289 n.65 (2013); Kenneth S. Abraham, The Liability Century: Insurance and Tort Law from the Progressive Era to 9/11, at 78-103 (2008). For example, auto insurance mandates may have inflationary effects on health costs and may lead to more accidents than there would be without insurance because of the “moral hazard” effect of having liability coverage. Yet, because of the importance of the public policy issues raised by auto injuries, we have developed a complex and enduring array of insurance products, many of which are mandated. The result of this is that auto injuries are the most frequently compensated type of injury in torts. Prof. Gold’s article powerfully questions the priorities our system reflects.
