1. It is common for the leasing agent/landlord to request that they be added an Additional Insured to your Commercial General Liability policy.
Where your company has caused a loss through your negligence, if your client had been added as an Additional Insured then they will be protected under your policy for their defense costs if named in a lawsuit. The Insurance Company is fine with this, as they are paying our due to your negligence.
However, it is important to watch for the term “Named Additional Insured or Additional Named Insured” . These are a very different terms in insurance. In essence, this request will allow the third party to be a named insured on your policy and could pick up coverage for their operations without the landlord having to pay any premium.
2. It is also common to see a request in a lease requiring 30 days notice of cancellation on your policy and this is also not too much of a concern. In this clause, your insurance company becomes obligated to notify the interested party if your policy is being cancelled, either at your request or if there is a material change to your policy and the insurance company wants to get off risk. If you request the cancellation and there is a party with this clause, you will have to wait the 30 days to cancel the policy. If the insurance company is cancelling the policy, then the standard notice applies to you (15 days by registered letter or 5 days if hand delivered) but it will be extended to the interested party for a full 30 days.
It is very important to watch out for the following:
3. What limit of liability the lease is requiring that you carry. If it is higher than you are now carrying presently, you will want to get a quote before you say “I do”. Once you have signed the contract you have no choice but to carry the limit they have requested or be in breach of your lease. This can get very expensive. It is normal to see a request for $2,000,000 but some leases are $5,000,000 – so if your lease reads $5,000,000 see if this is negotiable.
4. Special coverages are also sometimes required such as Equipment Breakdown coverage (also known as Boiler or Machinery). Is this something you need anyway or only to satisfy your lease? This could run hundreds of dollars and it might also be an indication that you are responsible for equipment owned by the building. You may also be responsible for signs, exterior glass and doors so you will want to make sure you have adequate coverage for this.
5. Often we will see a request for a waiver of subrogation in favor of the landlord. If this is reciprocal it may be fine with your insurance company – but you must check this with them – before agreeing to the clause. Often this clause is not reciprocal, so it means that a claim be put through your insurance company for something for which the landlord/leasing agent could very well be responsible for. This clause stops your insurance company from recovering damages from the landlord – even where your landlord/leasing agent were negligent.
For example, your landlord is responsible for snow removal in front of your office as well as the parking lot. A client coming to see you slips and falls, seriously injuring their arm. In the normal set of circumstances your business may be named and insurance company may pay the damages. At that point, the insurance company can go back to your landlord to recover damages, as they were the negligent party. However, with a waiver of subrogation the insurance company loses this recourse against the landlord. As you can imagine, the Insurance Company must be privy to this type of agreement and specifically allow this clause or there could be an ensuing legal situation.
It is best practice to have your Independent Insurance Broker review your Insurance and Indemnity provisions of your lease (or other contracts for that matter) before you sign them.
As usual, if you have any questions, do not hesitate to “Collis”.
Andrea & Staff