Anastase Maragos and Robert Powell share insights on why it's crucial to share your lease agreement with your insurance broker.
We have previously written about the importance of providing your insurance broker the full details of your property, to allow them to provide an accurate insurance policy.
One of the most common mistakes people make with respect to disclosure is failing to provide adequate detail with respect to a lease and their obligations under the lease.
Most leases impose different obligations on the lessee and tenant. These obligations often contain requirements for certain parties to obtain certain coverage for specific risks.
For tenants, common requirements or required types of insurance include:
- Naming the landlord as an additional insured with their own limits.
- Insuring your capital improvements.
- For example, if you are operating a metalworking shop and have installed CNC machinery, it is typically the tenant's responsibility to obtain coverage for that item.
- Insuring all property and building components directly attached to the tenant's business.
- Insuring the landlord's equipment or improvements – such as HVAC systems.
- If the building is a standalone building, insurance may be required over the entire premises (e.g., the parking lot, yard space) and not just the commercial or used space.
- Physical damage to property caused by vehicle accidents.
If proper coverage is not obtained, and an accident occurs, it can result in significant losses for the tenant.
The exact specifications of which party is responsible for which type of coverage will vary from lease to lease. As such, if you are a party to a lease, it is important you meet with your agent or broker and review your obligations under the lease.
If you have suffered a loss related to obligations under a lease, it is possible it was due to an error on the part of your broker.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
