Monday, September 04, 2017

Delaware Business Insurance Update From CNC Insurance Associates Inc. " Does Your Landlord's Lease Make Your Business Repsonsible For His Building?" 9-4-17

Many business owners will sign lease of premise contracts and not really know what is in the fine print. Many leases today push all the risk to the tenant. This could be problematic if the insurance policies that insure a business, who is a tenant, do not match up with the requirements in the lease. This is especially true with damage to property. Many leases today are making the tenant responsible for damage to the leased building. No longer is the responsibility relegated to their leased space only. In today's rental agreements the tenant may have to pay for damage to the total building, responsible or not. These lease provisions are usually in the indemnification clauses of the lease. The clause may state that the tenant has to indemnify the landlord for damage to the building out of activities of the tenant. The tenant may not even be responsible and still have to indemnify. The insurance policy for the tenant may not be set up to cover the total cost of damage to a landlord's building. Here is an example:
A business owner signs a lease for a 1200 square foot space in a large commercial building that houses 25 other tenants. In the lease the insurance requirements has the tenant cover their own property and provide Fire Legal Liability for the cost of their rented space, let's say in this example $100,000  in coverage. However in the indemnification provision of the lease, it states the tenant has to indemnify the landlord for damage to the total building. One night a fire broke out in the tenant's space and spread to the entire building. The landlord is now looking to the tenant to repair and rebuild his building. The tenant only has the $100,000 of coverage that was required by the insurance portion of the lease. Unfair?, Not Right?  This is an actual example of how a lease can cause major problems for business owners. Before you sign a new lease get your legal and insurance professionals to review it with you. Getting the right insurance in place to match the requirements of the lease will avoid dealing with  uncovered damages that a lease would make you responsible for. Until next time be careful out there and know your risks.

G. Kevin Nemith,   President CNC Insurance Associates Inc.
Serving DE, MD, NJ, PA & VA