Liability Insurance

Liability insurance protects the insured against the financial consequences of unintentionally causing harm to third parties-whether that harm involves personal injury, property damage, or financial loss. It covers valid claims for damages, settles them with the injured party, and at the same time defends against unjustified claims. In the real estate sector, two types are particularly relevant: personal liability insurance and property owner liability insurance.

Homeowner and Landowner Liability - Mandatory for Owners

As the owner of a building or property, you are liable under Section 836 of the German Civil Code (BGB) for damages incurred by third parties due to defects in your land or parts of the building-for example, a falling roof tile, icy conditions on the sidewalk, or a dilapidated stair railing. Homeowner’s liability insurance covers precisely these risks. It is strongly recommended for landlords and is also important for owner-occupied residential properties, as private liability insurance policies often only include this coverage for owner-occupied single-family homes.

Personal Liability Insurance in the Context of Property Ownership

If owners live in their own property, personal liability insurance covers everyday liability risks. For rental properties, however, separate property and landowner liability insurance is required, as personal liability insurance does not cover the landlord’s area of responsibility. For multiple rental properties, a policy that bundles all properties under a single contract is recommended.

Duty of Care and Insurance Coverage

Property owners have a broad duty of care: They must maintain the property and the building in a condition that does not endanger anyone. This includes snow removal on the sidewalk, roof inspections, lighting in stairwells, and securing construction sites. If an owner fails to meet this duty and someone is injured, they face substantial claims for damages and compensation for pain and suffering-which would have to be paid out of pocket without insurance.

Practical Tip for Owners in Nuremberg and Franconia

In the Nuremberg area, we regularly see that owners of rental properties have not taken out separate building and property owner liability insurance and mistakenly rely on their personal liability insurance. Check your insurance coverage: There should be a separate or bundled policy for each rental property. Ensure that the coverage limits are sufficient (at least 5 million euros for bodily injury and property damage) and that the policy includes damage to rental property as well as financial losses resulting from lost keys.

Frequently Asked Questions

As the owner of a condominium, do I need my own homeowners’ liability insurance?

Generally not for the common property-the homeowners’ association takes out a joint policy through the property management company. For the individual unit (e.g., damage originating from your apartment), it is recommended to supplement your personal liability insurance with an appropriate clause.

Is snow removal also relevant for insurance purposes?

Yes. If someone falls on the sidewalk in front of your property because you failed to fulfill your duty to clear snow and ice, the property owner is liable. In such cases, homeowners and property owners liability insurance covers the damages-provided there was no gross negligence.

Is property owner liability insurance tax-deductible?

Landlords can deduct the insurance premium as business expenses against income from renting and leasing. Owner-occupiers cannot claim the costs on their income tax return.

Liability Insurance and the Condominium Act (WEG)

In a condominium association, the association takes out a joint homeowners’ liability insurance policy for the common property. The costs are distributed among all owners as operating expenses. This coverage applies to damages to third parties resulting from defects in the common property-for example, a fall on the shared sidewalk or masonry falling from the exterior plaster.

Individual owners are responsible for their own separate property. Damage originating from one’s own apartment and affecting other owners-such as water damage from a pipe that seeps through the ceiling into the apartment below-is generally covered by private liability insurance or a separate clause. When taking out or reviewing a private liability insurance policy, one should therefore always check whether risks specific to apartment owners are included.

Landlords of condominiums should also check whether damage to the tenant’s property is included in their policy-since the tenant may cause damage to the apartment through improper use, for which the landlord must initially cover the costs.

Choosing the Right Coverage Limits

A common mistake with homeowners’ liability insurance is underestimating the necessary coverage limit. Damages resulting from bodily injury-such as when a passerby is seriously injured by a falling roof tile-can quickly result in costs running into the millions: medical expenses, lost wages, long-term care needs, and compensation for pain and suffering can quickly add up to amounts exceeding a coverage limit of two million euros. We recommend agreeing to a minimum coverage of five million euros for combined personal injury and property damage.

In addition, the following inclusions should be reviewed:

• Environmental liability: relevant for heating oil storage in the basement
• Key loss clause: covers the cost of changing locks if a master key is lost
• Damage to rented property: damage caused by the tenant to the rented property
• Financial loss: covers pure financial losses of third parties that do not result from personal injury or property damage

Checking insurance coverage when buying real estate

Anyone purchasing a property in Nuremberg or the metropolitan area should clarify, prior to the notary appointment, which insurance policies apply to the property and whether the coverage transfers seamlessly to the new owner. Building insurance automatically transfers to the purchaser pursuant to § 95 VVG, whereas liability insurance generally does not. The new owner must therefore take out their own policy immediately after the transfer of ownership or assume the existing one, provided the insurer agrees. We assist our clients in ensuring they do not overlook these organizational steps when purchasing real estate and in securing the appropriate insurance coverage in a timely manner.

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