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Certificate of Insurance: Commercial Buildings and Tenants

Posted by capital on February 6, 2018
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Certificate of Insurance – To reduce risk and liability, landlords of commercial buildings should ensure their tenants carry Commercial General Liability (CGL) insurance.

The CGL insurance protects the landlord from unforeseen disasters and accidents caused by tenants.  The tenant’s CGL insurance should name the Landlord, Landlord’s Agent, Landlord’s Mortgage(s) and any other designee of Landlord, as additional insured’s. This endorsement should be verified that as an additional insured the landlord is covered for bodily injury, personal injury, and property damage arising out of the occupancy of their space in the building.

Proving the tenant has the required  insurance can be more challenging because they can cancel insurance or change the terms as noted by Ira Meislik.  However obtaining a Certificate of Insurance(COI) from the tenant is a great step towards verification. The COI should specifically include details such as minimum limits and terms. Require a renewal certificate each lease year from tenants to ensure coverage is still in effect. A copy of the insurance policy is even better.

A competent commercial insurance broker can help determine the limits and amounts of insurance needed for the respective commercial building. The key is to get advice from an insurance broker who specializes in CGL insurance.  The specifics such as minimum limits, terms and financial ratings are often written directly into the tenant’s’ lease.

The following is an example of the language used in a commercial lease between Tenant and Landlord which outlines the insurance requirements:

“Tenant’s Insurance. Tenant covenants and agrees that during the Term, Tenant will carry and maintain, at its sole cost and expense, the following types of insurance in the amounts specified and in the form hereinafter provided for:

(a) Commercial General Liability. Commercial general liability insurance (occurrence basis commercial general liability insurance policy including Products and Completed Operations and Premises Legal Liability, on a form that is reasonably satisfactory to Landlord) with a combined single limit for bodily injury, including death, to any person or persons, and for property damages, of not less than $1,000,000.00 per occurrence, $2,000,000.00 aggregate plus excess/umbrella liability insurance containing a per occurrence combined single limit of $1,000,000.00 aggregate, for general liability, automobile liability, contractual liability, and employers’ liability. Said insurance shall cover any and all liability of the insured with respect to said Premises, the areas adjacent to the Premises (including, but not limited to, the sidewalk and loading dock), or arising out of the maintenance, use or occupancy thereof. All such insurance shall specifically insure the performance by Tenant of the indemnity provisions as to liability for injury to or death of persons and injury or damage to property contained in this Article 9. Tenant’s commercial general liability insurance shall name Landlord, Landlord’s Agent, Landlord’s Mortgagee(s) and any other designee of Landlord, as additional insured’s (using ISO Form CG 2010 (11/85), or equivalent). The amount of such liability insurance required to be maintained by Tenant hereunder shall not be construed to limit Tenant’s indemnity obligations in this Lease or other liability hereunder.”

For additional  information on the subject see  this article by Chandra Lantz of Hirschler Fleischer and radio podcast from Howard Kline