Luxury Apartment Owners Face Liability Questions Following Poolside Incident

Residents of a high-end apartment complex are raising concerns about safety and communication after a late-night disturbance at the property’s pool area. The incident took place in late August at the Alexan 5151 Apartments, located in the upscale Galleria area of Houston, Texas.

Cellphone video shows the man, who was arrested by police shortly after the incident, stumbling near the pool and firing a gun into the water, KTRK-TV reported. No injuries were reported, and the man was later confirmed to be a resident of the apartment community, according to FOX 26.

“It is concerning,” said Nick Nguyen, Underwriter, Commercial Insurance, Burns & Wilcox, Houston, Texas. “I know that area and it is historically a very high-end place. As of late, there has been an uptick in crime in that general area, so this would certainly be very concerning for the residents there.”

As of late, there has been an uptick in crime in that general area, so this would certainly be very concerning for the residents there.

When a tenant or guest is injured on the premises of an apartment complex, motel, or other residential building, the owner’s Habitational Insurance policies like Commercial General Liability (CGL) Insurance can respond to claims of bodily injuries or property damage. Excess Liability Insurance may also be recommended.

However, many CGL Insurance policies today specifically exclude firearm incidents, said Alex Cowling, Senior Underwriter, Commercial & Personal Insurance, Burns & Wilcox, Little Rock, Arkansas. “I would always recommend that clients review the forms list with their insurance broker, as there may be carriers that can offer terms without that exclusion,” he said.

Liability risks for apartment owners

Following the gunfire incident, tenants at the Alexan 5151 apartment complex voiced concerns about open doors and garages and said management did not appear to have any safety protocol changes planned. In a letter informing residents about what happened, the company said police considered it an isolated incident and encouraged tenants to be aware of their surroundings, report suspicious behavior, keep their doors locked, and take precautions with controlled-access doors and gates, FOX 26 reported.

While legal claims related to the gunfire incident are unlikely given that no one was injured, repeated events could make a lawsuit more likely, particularly if additional safety measures are not taken after the first incident, Cowling said. “If there are injuries or damage that occurs after something like this happens, and the landlord is found to have not had safeguards in place such as tenant screening procedures, they absolutely could be liable and open themselves up for some exposure to a lawsuit or potential claim,” he said.

[If] the landlord is found to have not had safeguards in place such as tenant screening procedures, they absolutely could be liable and open themselves up for some exposure to a lawsuit or potential claim.

The potential for legal action following incidents like assaults or slip-and-falls can be significant for apartment owners and managers, and lawsuits could result in settlements or verdicts exceeding standard CGL Insurance limits, Nguyen said. “Especially for large apartment complexes with multiple pools, CGL Insurance limits can get eaten up pretty quickly in the event of a claim,” he said, pointing to rising defense costs. “If they do not have an Excess Liability Insurance policy, the rest would come out of their pocket.”

CGL Insurance limits can get eaten up pretty quickly in the event of a claim. If they do not have an Excess Liability Insurance policy, the rest would come out of their pocket.

Any property damage to the pool or other structures due to the gunfire could be covered by Commercial Property Insurance, which is often packaged with CGL Insurance for apartment complexes, Nguyen said. Professional Liability Insurance, which can cover claims arising from errors or negligence in management decisions, may also be recommended.

Firearm exclusions increasingly common

Multiple lawsuits following gun violence at apartment buildings have made headlines in recent months. In August, a man in Las Vegas who was injured in a shooting in his parking lot filed a lawsuit against his senior apartment complex, claiming “proper security” such as lighted walkways could have prevented the incident, KLAS 8 News Now reported. In July, a $16 million settlement was reportedly reached between the families of victims killed in a shooting at a Jacksonville apartment complex and the apartment owners and property managers, with a news release from the law firm representing the families pointing to “inadequate safety measures and poor property management” as factors in the tragedy.

In June, an apartment complex in Charleston, South Carolina, was named in a wrongful death lawsuit alleging that its management failed to protect residents after a fatal shooting and multiple other incidents, according to The Post and Courier.

Apartment owners facing these types of lawsuits may find that they have no insurance coverage for it, Nguyen said. “Gun violence is generally not covered on a Habitational Insurance policy,” he said.

According to Cowling, firearm and weapon exclusions have become increasingly common on CGL Insurance policies within the past six months to a year. Building owners seeking this coverage should review their policies carefully, he said.

“Look at the forms list in its entirety,” he said. “Especially now, in today’s economy, it is easy to get focused on the price and not look at anything else. Price is a very important factor, but typically if one policy is a lot less expensive than other options, there is a reason. Coverage may not be as broad, the limits may not be as high, or any other combination of factors.”

Ensuring adequate coverage

Finding coverage for firearm-related incidents is still possible, however. “We have access to multiple insurance carriers that will write habitational risks and may or may not have this exclusion,” Cowling said. “Some insurance carriers are more flexible than others and may be willing to remove certain exclusions or offer a sublimit for a particular exposure for an additional premium.”

Insurance coverage for apartment complexes with armed security guards may also be more challenging to obtain due to the firearm exposure, Nguyen noted. Crime scores, security systems, safety protocols, and other factors may play a role in coverage determinations, but even having an unarmed security guard could help the insured in reducing the likelihood of costly incidents, which could lead to lower premiums.

It is often carrier-dependent and crime score-related,” he said. “Being here in Houston in the fourth largest city in the U.S., there is a lot of potential for crime to happen. Carriers are looking at reviews on Google and other sources during the underwriting phase — they want to make sure they are insuring a good risk.”

Upgrades to exterior lighting, cameras, restricted access points, tenant screening, and 24-hour security staffing may also be important. “Anything from a mitigation standpoint that a property owner or management company can do is usually going to help,” Cowling said. “That could be in the form of premium credits or obtaining broader coverage.”

Anything from a mitigation standpoint that a property owner or management company can do is usually going to help.