What happens with insurance if a tenant causes a fire in my apartment building?
Your commercial property insurance covers the building damage regardless of who caused the fire. Your insurer may then subrogate against the tenant or their renters insurer.
If a tenant causes a fire that damages your apartment building, your commercial property insurance covers the damage to the building structure, common areas, and your property as the landlord, subject to your deductible. It does not matter that the tenant caused the fire; your policy covers the building against fire damage regardless of the source.
After paying your claim, your insurer may exercise its right of subrogation to recover the claim payment from the responsible tenant. The right of subrogation is preserved in the ISO Commercial Property Conditions form (CP 00 90) and allows the insurer to step into the policyholder's shoes to pursue the negligent party. If the tenant has renters insurance with liability coverage, the tenant's renters policy would typically pay the subrogation claim. If the tenant does not have renters insurance, the insurer may pursue the tenant directly, though collecting from an uninsured individual can be difficult.
The fire would likely also trigger your loss of rents coverage, which pays for the rental income lost from units that are uninhabitable during the repair period. If other tenants' personal property was damaged, those tenants would file claims under their own renters insurance policies. Your general liability policy would generally not be involved unless you were somehow negligent (for example, if the fire was caused by a faulty appliance you provided or a defective electrical system you failed to maintain). Local fire codes (typically based on NFPA 1, the Fire Code, and the International Fire Code) establish the fire safety standards landlords must meet; failure to comply with these codes can establish negligence on the part of the landlord.
This scenario illustrates why requiring tenants to carry renters insurance is good practice. It ensures there is a liability policy in place to respond to subrogation claims and reduces the likelihood that the tenant's negligence creates a complex recovery situation.