What Type Of Insurance is Needed as A Tenant?
The relationship between tenant and landlord can be, at times, difficult to understand, and the murky circumstances of insuring a tenant’s improvements on a leased business property is a prime example of this. A lessor may choose to keep things simple by dictating that they will insure the structure and property, while the lessee insures the removable property that they store and install within the business—but it’s the improvements that cannot be removed—wiring, cabinetry, plumbing—that can potentially cause a headache.
Who is Responsible for What?
If the respective party’s responsibilities are not carefully delineated in the rental agreement, and catastrophic damage to the property occurs, it can be difficult after the fact to assess who is responsible for replacing what. While the landlord may have insured the basic structure, all the improvements within it may not be covered under the landlord’s policy. Additionally, disagreements about whether the lessee or lessor owned the improvements within the building only further confound the issue. In the meantime, without the contents of the business that were destroyed, it may be difficult or impossible for the business owner to secure the funds necessary to restore the interior to the condition necessary for the business to operate.
Read Your State Laws
A great deal of case law has been devoted to this issue, as many disasters similar to the one described above have occurred. The currently established legal precedents vary widely from state to state, and so it is impossible to give a generalized answer as to who is responsible for what. The simplest resolution is simply this: Within the rental contract, the responsibilities of the two parties should be outlined explicitly. It should be indicated what improvements are owned by each party, and what obligations each party has in maintaining insurance policies on the property and its contents. A lessor may specify that they will insure the structural shell, while the lessee is responsible for everything therein, or the lessee may be required to only insure removable contents within the structure, with the lessor covering everything else. Or one party or the other may take sole responsibility.
The main issue is that insurance responsibilities should be negotiated and clarified before a catastrophe occurs, rather than having to rely on the ruling of a court after the fact. With over 40 years’ experience in this type of insurance, Harrington Insurance can help you navigate these waters at the best price. Give us a call today and we’ll be happy to help!