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Liable Landlords? CRE Lawsuits Of 2019 Claim Property Owners Should Have Prevented Crimes

The commercial real estate world battled a series of high-profile lawsuits in 2019, all of which have the potential to reshape the way landowners and property managers assess risk in the future. 

From a lawsuit against Walmart for its alleged failure to provide security to prevent a deadly shooting to a high-profile suit against major U.S. hotel brands for failing to stop human trafficking on-site, plaintiffs' lawyers put landlords and buildings owners on the defense this year, greatly expanding the types of premises liability cases that land in court. 

The new cases also test whether judges or juries will begin holding landlords and operators more liable for the actions of third parties who enter their premises.

Liable Landlords? CRE Lawsuits Of 2019 Claim Property Owners Should Have Prevented Crimes

Most of this litigation remains active, so it isn't clear yet if responsibility will truly shift toward property owners, but attorneys in 2019 highlighted all the ways in which landlords remain legally vulnerable in a society wracked by overt and covert crimes on commercial premises. 

Win or lose, the CRE defendants will pay at least thousands if not millions of dollars in attorneys fees in some of the larger cases. 

Plaintiffs' attorneys and experts debriefed Bisnow several times in 2019 on the best ways for the commercial real estate industry to assess these litigation risks early on and react to them effectively to prevent litigation. 

The solutions run the gamut from acquiring active-shooter insurance to ensuring a set of established protocols to mitigate risk.

Photo by Kevin Angelsø on Unsplash

Human Trafficking Becomes A CRE Issue

More often than not, human trafficking occurs in hotels, bars, restaurants and other commercial premises. Lawsuits and proposed legislation this year would hold owners of those properties responsible for those incidents of trafficking.

“Property owners and landlords are the key to ending storefront trafficking in Texas,” Children at Risk Senior Staff Attorney Jamey Caruthers said when interviewed by Bisnow in July. “Trafficking occurs in cantinas, especially in Harris County [Houston], but to a lesser extent elsewhere as well, modeling studios, strip clubs and most prevalently in illicit massage businesses.”  

Texas Senate Bill 498, proposed in this year’s legislative session, took aim at building owners. It would allow tenants to break leases if their landlord failed to respond to reports of sex trafficking or evict the trafficker. The bill didn’t pass before the session ended, but it made it through the Senate, and Caruthers said advocates and lawmakers will tee it up again for the 2020 session. 

Houston attorney Annie McAdams with McAdams P.C. filed suit in 2018 and 2019 against most of the major U.S. hotel brands, alleging various properties had knowledge of or should have had knowledge of trafficking on the premises and failed to prevent it with the right check-in policies and procedures. 

“What we are alleging is that when a business knows that there’s trafficking, and they are taking money for rooms and so forth, then they are responsible for facilitating trafficking in that regard,” McAdams told Bisnow in July. 

She said hotels and commercial property owners who want to avoid litigation only have to take simple steps to mitigate or thwart the risk of liability. She also advises property owners and managers to document every effort they take in combating and preventing trafficking on-site. 

“The best thing a hotel owner or premises owner can do is implement policies and procedures to report incidences of trafficking,” McAdams said. “But also be able to show how you are monitoring those protocols. It's not enough to say I have a policy or procedure, or I’m trusting this person to do it; you have to verify it yourself, because I think a jury is going to be a lot more sympathetic to a defendant who comes in with books and logs and shows a proactive application of these policies and procedures.”

Liable Landlords? CRE Lawsuits Of 2019 Claim Property Owners Should Have Prevented Crimes

Active Shooters Are No Longer Unforeseeable Risks And There's Insurance For It

Major retailer Walmart was sued after an armed gunman fired on dozens of shoppers in one of its stores in El Paso, Texas, Aug. 3, killing 22 and leaving 24 wounded. 

While active-shooter cases historically have been deemed unforeseeable threats in which a property owner is not necessarily liable, an attorney out of Texas is now using the chain's large national footprint and past crimes at various Walmarts to allege in litigation that the retailer failed to provide adequate security prior to the shooting. 

“That’s fairly common [not to have guards at retail centers],” said Jeff Bettinson, a 19-year property management veteran and owner of iTrip Vacations Salt Lake City, who spoke to Bisnow in September. “Mostly what they have is loss prevention and different companies will do it a different way.”

But attorneys for the family of an El Paso shooting victim allege Walmart's history of crimes at various store locations and its failure to hire local police or armed guards put shoppers at risk and the store on notice that a guard should have been used at El Paso. 

“From what we have been able to find out so far, there was no discernible security presence at the store when the shooting took place,” attorney for the plaintiffs Patrick Luff with The Ammons Law Firm told Bisnow. “When you look at the original petition that we filed, I include what has been reported from the shooter that he went in and cased the place, and he didn’t see anything that deterred him at that time.”  

The case law on active shooters is unsettled and more often than not, it leans in favor of the property owner not being able to predict this type of risk. But the cost of litigation is high enough and the risk of active shooters publicized enough, that insurance brokers now offer active shooter insurance. 

Thompson Insurance Inc. insurance broker Drew Gunn told Bisnow in September that the case law on this issue of landlords or property managers becoming liable for having no security guards is still untested. But because of the risk of litigation and increased frequency of shooting incidents, he has been brokering active-shooter insurance policies to retailers and businesses as protection regardless.   

“Some of these things end up settling out of courts, so there are no punitive damages that are brought. But that’s the reason to carry the insurance coverage because then the insurance will pay for the legal expenses of the insured and also for any settlements,” Gunn said.

Liable Landlords? CRE Lawsuits Of 2019 Claim Property Owners Should Have Prevented Crimes
NorthPark Center parking garage

Car Accidents On-Site: Parking Lot Death Ends In Litigation Against Mall

Shopping centers that deal with enormous amounts of traffic also have to be wary of traffic control issues.

Dallas' upscale NorthPark Center mall was sued in November after a car accident by a drifter (someone participating in car stunts) in its parking garage led to the death of one shopper and the critical injury of another.

The lawsuit alleges the property owner is at fault because it failed to implement speed bumps and other traffic and parking-lot access control devices that could have blocked the vehicle from entering the lot or forced it to control its speed. Attorneys for the injured victim said the mall knew drifters regularly use its garages, but did not act to prevent this behavior.

NorthPark has denied all of the allegations, but the case highlights the types of issues plaintiffs' attorneys may raise against parking lot operators. 

This case, like the others, remains in litigation. 

While the outcomes of these headline-making premises liability cases do not foretell whether the property owners will ultimately be liable, they do show the areas of litigation risk for commercial real estate. As victims of crimes are increasingly attempting to hold the owners of crime scene locations legally responsible for not preventing the crimes, property managers and building owners are facing pressure to lessen the risk of accidents and crimes on-site before they even occur.