Momentum - Business to Business Online Magazine MOMENTUM September 2018 | Page 21

Insurance Requirements in Lease Agreements By: Jan Laman [email protected] Harbour Insurance Services, Inc. Read your commercial lease agreement and you may find that the landlord will want you to be responsible for damage to portions of the building, such as HVAC equipment and glass and even the betterments and improvements inside the space you lease. Building lease agreements almost always contain clauses that require the tenant to insure something. Liability Insurance. Most lease agreements require the tenant to carry liability insurance with a specified limit of liability, such as $1,000,000 for each occurrence, and usually require the tenant to add the landlord as an additional insured. This coverage protects you and the landlord in case a customer or visitor is injured while on your premises. These requirements are easily addressed with a Commercial General Liability policy that includes a special endorsement to include the landlord as an additional insured. Property Insurance. A tenant’s obligation for damage to the building may not be expressed in the lease agreement at all. You may be legally liable for damage caused by your negligence or the negligence of your employees. For example, if a fire caused by your negligence damages or destroys the building, you may be responsible for the full cost of repairs or replacement. Your general liability policy provides only a limited amount of fire damage legal liability coverage for such a loss. Other types of damage, such as accidentally running a vehicle through the side of the building, are not covered at all. One way to avoid this type of liability is to negotiate a provision in your lease that requires you and the landlord to carry property insurance on property owned by each of you. You agree to carry insurance on your business personal property and the landlord agrees to carry insurance on the building. Another provision in the lease then prohibits your respective insurance companies from trying to recover the amounts paid from the responsible party. This is called a “waiver of subrogation.” If you have already signed the lease without such provisions, and you can’t re- negotiate the lease to add them, your agent can arrange the appropriate coverage for this exposure. Sometimes there are more specific requirements in lease agreements that make tenants responsible for all kinds of damage – including wind or hail damage – to specific components of the building, such as HVAC equipment, roof coverings and glass. In addition, lease agreements may make tenants responsible for routine maintenance, repair or even replacement of HVAC and other building equipment. Your Agent can arrange the appropriate coverage for these exposures, but only if we are aware that they exist. In most cases, all these requirements can be addressed by purchasing a “Business Owners Policy” from your Insurance Agent. This policy includes General Liability and Property Damage Coverage along with necessary Loss of Income coverage and so much more. It is important for you to carefully review your lease agreement with your attorney and your insurance agent to determine the coverage you need. MOMENTUM / September 2018 20