Whether you are the owner of a commercial building (lessor) or a tenant in that building (lessee) your insurance policy should be designed to reflect the requirements of the lease agreement between the owner and the tenant. Unfortunately, many lessors and lessees do not review or understand the insurance portion of their lease contract which can lead to them not having enough coverage especially during a claim.
Each party should have liability coverage in place on their policy. It is important the lessee complies with the limits being required by the lessor/landlord . We suggest the lessor/landlord have the tenant provide them with proof of insurance and perhaps be named as an additional insured as well as other requirements.
Another crucial area is tenant improvements and betterments (TIB). For example, if a tenant installs $200,000 of improvements into the building (lighting, flooring, cabinets, anything permanently attached to the building), who is responsible for the insurance of these improvements? The lease contract between the lessee and lessor will be a guiding factor for who is responsible for the Tenant Improvements and Betterments and the insurance company will settle the claim based on that lease agreement.
Even though our agency cannot render legal advice, we can review lease agreements (insurance section) and make suggestions that you can ultimately discuss with your attorney. Most importantly is to understand that your lease is extremely important in working through insurance claims and you need to understand the details associated with your lease before a loss occurs.