What your commercial lease really requires from your insurance
Additional insured, waiver of subrogation, primary and noncontributory. A plain-English guide to the insurance clause in your lease before you sign it.
Every week a business owner sends me a lease three days before opening and asks for a certificate of insurance. Most of the time we can make it work. Sometimes the lease requires coverage the business does not have, or wording that no carrier will provide, and the opening date slips. Reading the insurance section before you sign avoids that.
Here are the requirements we see most often in commercial leases around Cleveland, what they mean and how to handle them.
General liability limits
Almost every lease requires commercial general liability, typically $1 million per occurrence and $2 million aggregate. Some landlords in larger retail centers require $2 million per occurrence or an umbrella on top. A business owners policy usually includes general liability at these limits, and an umbrella can raise them affordably.
Additional insured status
Your landlord will almost certainly want to be named as an additional insured on your liability policy. That extends your coverage to protect them if they are sued because of your operations, for example a customer who slips in your store and sues both you and the property owner. Most BOPs include a blanket additional insured endorsement for landlords, but some require the landlord to be scheduled by name.
A certificate of insurance does not create coverage. The endorsement on the policy does. We make sure the endorsement matches the lease before the certificate goes out.
Waiver of subrogation
Subrogation is your insurance carrier's right to recover what it paid from whoever caused the loss. A waiver of subrogation means your carrier gives up that right against the landlord. Leases frequently require mutual waivers, which is reasonable, but your policy must include the endorsement or you can create a coverage problem. Many carriers include a blanket waiver where required by written contract.
Primary and noncontributory
This phrase means your policy pays first, before the landlord's own insurance, and will not ask the landlord's carrier to share the loss. It is common in leases and construction contracts. Not every policy includes it by default, so it needs to be confirmed or endorsed.
Property and tenant improvements
The lease will define who insures what. The landlord generally insures the building shell. You typically insure your business personal property, equipment, inventory and often tenant improvements and betterments you paid for, such as a buildout, flooring or a restaurant hood system. Undervaluing improvements is a common and expensive mistake.
- List everything you paid to install and the approximate cost.
- Check whether the lease makes you responsible for glass.
- Confirm who insures HVAC units serving only your space.
- Ask for business income coverage long enough for a realistic rebuild, often 12 months.
Other coverages leases mention
Depending on the property and your industry, leases may also require liquor liability for bars and restaurants, workers' compensation evidence, commercial auto for businesses with delivery vehicles, or an umbrella policy. In Ohio, remember that workers' compensation comes from the Bureau of Workers' Compensation and you will need stop gap employer's liability to satisfy most lease and contract language.
Notice of cancellation
Many leases require 30 days' written notice to the landlord if your policy is cancelled. Carriers generally will not promise to notify certificate holders directly, but many offer a notice of cancellation endorsement to scheduled parties. We handle that so you are not in technical default of the lease.
Before you sign
- Send us the insurance section, often called Indemnity and Insurance, before you sign.
- We will mark anything unusual, expensive or unobtainable.
- Negotiate before signing. Landlords often accept reasonable changes.
- Once signed, we will bind coverage and deliver a compliant certificate.
Ten minutes of review before signing can save weeks of delay and thousands of dollars. Send the lease to our commercial team and we will turn it around within two business days.
This article is general information, not legal advice or a statement of coverage. Your policy terms, conditions and exclusions control.
