Property Leases

 James R. Mahurin, CPCU, ARM - Risk Management & Insurance Consulting - Property LeasesThis is an example of how the insurance industry ignores significant exposures faced by a substantial percentage of the nations economy.

Seventy to eighty percent (70% – 80%) of real property leases involve significant transfer of responsibility to the tenants.  This transfer is important to both landlord and tenant.

The insurance industry’s primary policies expressly exclude lease obligations.  The standard business liability insurance policies excludes property damage to “…property you own, rent, or occupy” or “damage to property in your care, custody or control.”  Standard property insurance applications, underwriting process and policy forms omit lease issues.    Tenants occupying leased space assume six (6) and seven (7) figure obligations not addressed in their insurance programs.

The general public, and the insurance industry, is sadly unaware of procedures to address this very common exposure.  In seminars to national audiences of insurance personnel you find perhaps five percent (5%) are even conversant on the subject.  A far smaller number are conversant as to remedies.

Insurance issues related to triple net property leases can create tremendous problems for both Landlord and Tenant.  Insurance requirements in triple net property leases are rarely consistent with – or even close to – language used in the insurance industry’s policy forms.  This disparity causes very expensive problems.