The facts
Mr. Smit had been a property manager in his hometown for over 30 years. His firm, Smit Property Management Services, was well established and trusted within the community. Families were leaving town to find jobs in other areas and needed Mr. Smit to manage their properties. Mr. Smit was contacted more and more to rent out homes. Banks were also calling him to manage their foreclosures and prepare them for resale. As business started to pick up for Mr. Smit, the increase began to overwhelm him. He then made the decision to hire two employees to assist him.
Mr. Smit trained two recent college graduates and thought he taught them everything they needed to know. He assigned them each a handful of properties to manage, including contracting landscapers, scheduling quarterly inspections and collecting rent. But he was too busy to monitor their every move.
Approximately one year later, the Johnson family, who had hired Smit Property Management Services, returned to the area to visit family. Nostalgia led them to drive by their property as they entered town. Within seconds, their eagerness to reminisce turned into fury as they sat in their car and observed the demise of their home: What little grass was left hadn’t been cut in months, an old car was propped on bricks in the front yard, two pit bulls were chained to one of the axles of the propped car, a side window was covered with plastic bags, taped and nailed to what once was beautiful red wood siding, a refrigerator was sitting on the front porch and a large satellite dish was poorly installed on the roof which ruined the slate shingles that were installed three years prior.
Mr. Johnson called Mr. Smit enraged. After Mr. Smit drove by the property to see how his new employees had managed it, the first time he had seen it in over a year, there was nothing left for him to do but to put his insurance carrier on notice. Mr. Smit thought he taught his two new hires just about everything, but unfortunately, they had failed to monitor the property.
The result
Mr. Johnson’s attorney sued Mr. Smit for negligent supervision, breach of contract, fraud and intentional acts. Immediately after Mr. Smit received the letter from the Johnson’s attorney, his two hires quit and opened their own property management firm in a nearby town. They refused to cooperate with the insurance carrier and left Mr. Smit to carry the weight on his own. The Johnson’s attorney originally demanded $275,000 in the lawsuit. The carrier was able to settle out of court for $82,000.
Risk factors
Risk factor #1
Mr. Smit put himself at risk by taking on more than he could handle and placing too much trust in his new and young employees. Mr. Smit should have made an honest assessment of his capacity before spreading himself too thin.
Risk factor #2
Mr. Smit should have allocated time to monitor and review his new employees work to make sure they were putting his training into action.
*The claim scenario is strictly documented for illustrative purposes only and provides an example of what a policy could cover. It is intended to provide a general overview of the program described. Please remember only the insurance policy can give actual terms, coverage, amounts, conditions and exclusions. Program availability and coverage are subject to individual underwriting criteria.
