Protect Your Loss History with Lease Insurance Requirements

February 09, 2015

With the commercial real estate market bouncing back in many regions, 2015 is shaping up to be a promising year for landlords. As the market continues to improve and you attract new tenants, it’s more important than ever to protect your loss history by structuring your leases so they provide you with as much protection as possible.
Slip and falls happen all the time, and the last thing you want is for an individual who got injured on your tenant’s premises to sue you. While you can’t prevent them from taking legal action against you, there are ways to safeguard your company if you find yourself in this precarious situation.

Loss History
Insurance loss history is something that landlords often overlook, but they shouldn’t. Your loss history is exactly what it sounds like, a history of your insurance losses, typically, over a five-year period. The reason why this is so important is because the more losses you have, the more likely you are to pay higher insurance rates.

Insurance Requirements
The first step in protecting loss history is making sure insurance requirements are in all of your leases. These requirements need to be stringent, clear and applicable to the tenant’s industry. For example, if one tenant runs a daycare business and another runs a restaurant, the different risks associated with each of these industries should be reflected in the insurance policies you require them to have. You also want to make sure the tenant indemnifies you in their lease for any kind of liability claim that could be brought against you.

Additional Insured
Another best practice is making sure your tenant lists you on their insurance policy as an additional insured on a primary and non-contributory basis. This means that your tenant’s insurance is primary to yours and your insurance won’t contribute to any loss that is paid. In other words, if a slip and fall happens on your tenant’s premises, their insurance kicks in to cover the cost, not yours.

Knowing that people get injured on properties all the time, you have to do what you can to minimize your risk as a landlord. Laying out clear language in lease agreements and having strict tenant insurance requirements is a great way to keep you insurance loss history clean and control your expenses. However, since each situation is unique, it’s always recommended that you work with an insurance broker to ensure you have all your bases covered.