A property management company should carry general liability, errors and omissions, a fidelity bond or crime policy, workers' compensation and cyber coverage, and who pays for its mistakes depends on the indemnity clause in your agreement. Your property manager holds your money, your tenant's deposit, your keys and the authority to sign notices in your name. When they get something wrong, the loss lands on you first: a deposit refund the court awards against the owner, a notice served incorrectly that resets an eviction, a vendor who was never verified and left a bad repair. Whether any of that comes back to the manager depends on two things you can check before signing: the insurance the company carries, and the indemnity clause in the agreement.
This guide covers both, in the order you should check them. It is about the manager's coverage and the manager's liability, not yours; the landlord policy you need on the house itself is covered in landlord insurance versus homeowners insurance.
The insurance a management company should carry
Five policies cover the ways a manager can hurt you. Ask for a certificate of insurance showing each one, with limits and carrier names, before you sign.
- General liability. Covers bodily injury and property damage claims arising from the manager's operations, such as a prospect injured during a showing the manager conducted or damage caused by the manager's staff at the property.
- Errors and omissions, also called professional liability. Covers financial loss caused by the manager's professional mistakes: a mishandled deposit accounting, a lease with a defective clause, a fair housing complaint from a screening decision, a notice served wrong. This is the policy that matters most to an owner, and the one small operators most often lack.
- Fidelity bond or crime coverage. Covers theft or misappropriation of funds held in trust, by an employee or the principal. Your rent, your reserve and your tenant's deposit pass through the manager's trust account, and this is what stands behind them.
- Workers' compensation. Not required of most private employers in Texas, but important because an injured employee of an uninsured manager can look to the property owner.
- Cyber liability. Covers a breach of the portal, payment system or tenant records, and the costs of notification and recovery. A manager who collects rent online and stores applications holds exactly the data breaches target.
A broker-owned company in Texas is also subject to the license and trust account rules of the Texas Real Estate Commission, which is a regulatory backstop rather than insurance, but it is one more reason to confirm the license as described in how to verify a property manager's license and reputation in Texas.
The indemnity clause: read it before anything else
Nearly every management agreement has a hold harmless or indemnification section, and it usually runs one direction: the owner agrees to defend and indemnify the manager against claims arising from the property. That is normal, because the manager is acting as your agent and most claims about the house belong to the owner. What you need to check is the carve-out.
A fair clause excludes the manager's own negligence, willful misconduct and breach of the agreement from the owner's indemnity. In other words, you cover the manager for ordinary claims about the property, but not for the manager's own mistakes. An unfair clause has no carve-out, or has one so narrow, such as gross negligence only, that ordinary carelessness is still your problem. Some agreements go further and require you to indemnify the manager even for fair housing violations arising from the manager's own screening decisions, which puts you on the hook for an error you had no part in.
The wording to look for, in plain terms: the owner's indemnity does not extend to losses caused by the manager's negligence, willful misconduct or breach of this agreement. If that sentence is missing, ask for it. The broader list of clauses to read is in the property management agreement: what to look for.
What happens when a manager's error costs you money
Walk through what actually occurs, because it is rarely a clean refund. The sequence has four stages.
- The loss hits the owner. A judgment, a lost month of rent, a repair that has to be redone. The owner pays first, or the loss is deducted from the owner's funds, because the owner is the party the tenant or vendor can reach.
- The owner raises it with the manager in writing. A clear description of the error, the loss and the amount, with the documents. Most reputable managers resolve clear errors at this stage, by crediting the owner's account or paying the loss, because it is cheaper than the alternative and their reputation depends on it.
- The manager's insurer is involved. For a larger loss, the manager tenders the claim to their errors and omissions carrier. The carrier investigates, which takes time, and pays if the error falls within the policy and the policy's deductible is exceeded.
- Dispute. If the manager denies the error or the policy does not respond, the owner's recourse is a claim under the agreement, a complaint to the licensing authority for a license violation, or a lawsuit. The indemnity clause and the agreement's dispute terms decide how that goes.
The practical lesson is that stages two and three work when the manager is insured and the agreement has a fair carve-out. Without insurance, stage three does not exist, and without the carve-out, stage four is uphill.
Three common manager errors and who ends up paying
Illustrative scenarios, not any real case.
A deposit accounting sent late. Texas law sets a deadline for returning the deposit or an itemized list of deductions after move-out, and a landlord who misses it in bad faith can owe the tenant penalties beyond the deposit. The tenant sues the owner, since the owner is the landlord of record. A manager who caused the delay should cover the penalty under a fair agreement, and an errors and omissions policy exists for exactly this.
A notice to vacate served wrong. The eviction case is dismissed and refiled, costing another month of unpaid rent and a second filing fee. The owner carries the lost rent. Whether the manager reimburses it depends on the carve-out; many will credit the filing fee and argue about the rent.
An unvetted vendor. A handyman with no insurance does a roof patch that fails and damages the interior. The owner's landlord policy may cover the damage, subject to the deductible. The vendor has nothing to collect. The manager's exposure is the failure to vet, which again comes back to the carve-out and the manager's own coverage. How vetting should work is on the maintenance page.
Liability caps, limits and what they mean for one house
Two numbers decide whether coverage is real. The first is the policy limit on the manager's errors and omissions and crime coverage. For a company managing many properties, a limit that sounds large can be small when spread across every owner it could owe at once. Ask the limit per claim and in aggregate, and compare it with the amount of your money that sits in the trust account at the peak of a month.
The second number is any cap on the manager's liability written into the agreement. Some agreements limit the manager's liability to the fees paid in the prior twelve months, or to a fixed amount, regardless of the loss. That cap can be lower than one month of rent. If the agreement caps the manager's liability, ask for the cap to be removed or raised to at least the limit of their insurance, so the policy you were shown actually stands behind you. This is general information, not legal advice; for an agreement with a liability cap or a one-sided indemnity, have a Texas attorney read it before you sign.
Where your own coverage still has to do the work
Even with a well-insured manager, the owner's policies carry the first and largest share of most losses, because the owner owns the property and the risk. Your landlord policy covers damage to the house and liability for injuries on it. An umbrella policy extends that liability. Your manager's coverage picks up only the slice caused by the manager's own error, after the deductible, and only if the agreement does not push it back to you.
Two practical steps close the gap. Have the manager named as an additional insured on your landlord policy, which most managers will require anyway and which keeps a claim from turning into a fight between two insurers. And require renters insurance in the lease, so a tenant-caused loss has a policy behind it before anyone looks at the owner or the manager. When a second layer of liability coverage is worth buying is covered in umbrella insurance for landlords.
What to ask a manager about insurance and liability before signing
- Can I see a current certificate of insurance showing general liability, errors and omissions, crime or fidelity, workers' compensation and cyber coverage?
- What are the limits per claim and in aggregate on the errors and omissions and crime policies?
- Does the agreement's indemnity exclude your own negligence, misconduct and breach?
- Is there a cap on your liability in the agreement, and what is it?
- If you make an error that costs me money, what is your process for making me whole?
- Is your trust account audited or reconciled monthly, and will I see the reconciliation?
A manager who answers these without hesitation and sends the certificate the same day is telling you how they run the rest of the business. One who treats the questions as an insult has given you the answer. The full-service overview describes how Perpetual structures its responsibilities, and the owner FAQ answers the related questions owners ask most.
How Perpetual handles this
Perpetual is a broker-owned company, licensed and accountable under Texas real estate rules, and I will show you our certificate of insurance before you sign rather than after you ask. Owner and tenant funds are held in a trust account, reconciled monthly, and your statement in the owner portal shows every dollar in and out so an error would be visible to you the month it happened, not a year later.
The management agreement you receive, alongside a written quote with every fee listed, is written to be read: the indemnity and liability terms are in plain language, and I will walk through them with you line by line at the first consultation. The strongest protection against a manager's mistake is a manager who makes few of them, which is why Perpetual uses consistent written screening criteria, Texas-compliant leases, documented inspections and vetted, insured vendors across Keller, North Richland Hills and Fort Worth. If you want to see the certificate and the agreement before deciding anything, contact me and I will send both.
The takeaway: Check the certificate of insurance and the indemnity carve-out before you sign, because together they decide whether a manager's mistake stays with the manager or becomes your loss.
Questions owners ask
What insurance should a property management company carry?
General liability for injury and property damage claims, errors and omissions for professional mistakes such as a mishandled deposit or a defective notice, a fidelity bond or crime policy covering theft of funds held in trust, workers' compensation if the company has employees, and cyber liability for the portal and payment data. Ask for a certificate of insurance showing each policy with its limits before you sign, and compare the crime and errors and omissions limits with the money that passes through the trust account.
What happens if my property manager makes a costly mistake?
The loss usually hits you first, because the owner is the party a tenant or vendor can reach. You then raise it in writing with the manager, who should credit your account or pay the loss if the error is clear. Larger claims go to the manager's errors and omissions carrier. If the manager denies responsibility, your recourse depends on the indemnity clause and any liability cap in the agreement, a complaint to the licensing authority, or a lawsuit, so check those terms before signing.
Does the indemnity clause in a management agreement protect me or the manager?
Usually the manager, because the owner agrees to indemnify the manager against claims arising from the property, which is normal for an agent relationship. What protects you is the carve-out that excludes the manager's own negligence, willful misconduct and breach of the agreement from that indemnity. If the carve-out is missing, you could be covering the manager for their own mistakes.
Can a property manager limit their liability to the fees I paid?
Many agreements try to, with a cap equal to a year of management fees or a fixed amount. It is enforceable if you sign it, and it can be lower than a single month of rent. Ask for the cap to be removed or raised to the limit of the manager's errors and omissions coverage, so the insurance you were shown actually applies to you.
Should my property manager be named on my landlord insurance policy?
Yes, as an additional insured. Most managers require it, and it prevents a claim at the property from becoming a dispute between your insurer and the manager's. Your landlord policy still carries the first and largest share of most losses, with the manager's coverage responding only to the slice caused by the manager's own error.
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