A physical therapist in Coral Gables finds the right space for her second clinic: ground floor, good parking and a landlord willing to contribute toward the build-out. The broker sends over a forty-page lease, and buried in it is a section titled “Insurance” that runs nearly three pages. It asks for specific liability limits, names the landlord and its property manager as additional insureds, requires a waiver of subrogation, insists her coverage be primary and noncontributory and makes her responsible for insuring the improvements she is about to build. She has a business owners policy on her first location and assumes it will cover whatever the lease asks for.
Sometimes it does. Often it does not, at least not without changes. The insurance section of a commercial lease is one of the most consequential parts of the document for a tenant, and it is far easier to negotiate or prepare for before the lease is signed than to fix after a landlord’s property manager rejects a certificate.
Why Landlords Set Insurance Requirements
A landlord’s insurance requirements serve two purposes. They make sure the tenant can pay for injuries and damage it causes, and they shift as much of the risk of the tenant’s operations away from the landlord as possible. The landlord insures the building, and it wants the tenant’s policies to respond first to anything that happens inside the tenant’s space. Understanding that logic makes the specific clauses easier to read.
Liability Limits and Additional Insured Status
Most leases require the tenant to carry commercial general liability with a stated per-occurrence and aggregate limit. Many also require an umbrella or excess policy above it, and some require liquor liability, professional liability or other coverages depending on the business. The limits a landlord asks for are not always negotiable, but they should be compared against what the business already carries, because raising limits mid-term can mean an endorsement or a new umbrella.
Leases almost always require the landlord, and often its property manager and lender, to be named as additional insureds on the tenant’s liability policy. This gives them the right to coverage under the tenant’s policy for claims arising from the tenant’s operations or premises. Many policies include a blanket additional insured endorsement that applies whenever a written contract requires it, while others require each additional insured to be added by name. The lease may also specify the form or the scope of coverage required, and those details matter.
Waiver of Subrogation and Primary and Noncontributory
A waiver of subrogation prevents the tenant’s insurer, after paying a claim, from suing the landlord to recover what it paid, even if the landlord was partly at fault. Leases often make the waiver mutual, so the landlord’s property insurer waives its rights against the tenant as well. Most policies allow a waiver when it is required by a written contract signed before the loss, but some require an endorsement, and a waiver signed without the insurer’s permission can create coverage problems.
A primary and noncontributory requirement means the tenant’s policy must pay first for a covered claim involving the landlord, without asking the landlord’s own insurance to share the loss. It is common in commercial leases and usually requires specific endorsement language. Both requirements should be confirmed with your agent before signing, not after.
Tenant Improvements and Who Insures the Building
The lease will spell out who insures what. Typically the landlord insures the building’s structure, and the tenant insures its own business personal property, furniture, equipment and inventory. The gray area is tenant improvements and betterments: the walls, flooring, cabinetry, lighting and fixtures installed for the tenant’s use. Many leases make the tenant responsible for insuring these, even when the landlord paid for part of the build-out. If the policy’s business personal property limit does not include the value of those improvements, a fire or storm could leave the tenant paying to rebuild a space it does not own.
Some leases also make the tenant responsible for plate glass, storefront doors or certain building systems that serve only its space. In Florida, the lease may address windstorm responsibility and hurricane deductibles as well, and some pass a share of the landlord’s insurance cost to tenants through common area maintenance charges. Each of these affects what the tenant needs to buy.
Business Income and Rent Obligations
Many leases require the tenant to carry business income coverage, and some state that rent continues even if the premises are damaged and cannot be used. When rent does not abate, business income coverage with an adequate limit is what allows the tenant to keep paying it while the space is repaired. Our article on business income coverage in Florida explains how that coverage responds and why the limit matters.
Indemnity Clauses
Separate from the insurance section, most leases include an indemnity clause requiring the tenant to defend and hold the landlord harmless for claims arising from the tenant’s use of the premises. Insurance and indemnity work together but are not the same thing. A general liability policy covers many contractual indemnity obligations through its insured contract provisions, but not every promise a tenant makes in a lease is insurable. A broad indemnity clause can leave the tenant responsible for losses its policy will not pay, which is a point worth raising with an attorney.
Certificates of Insurance
Landlords and property managers will ask for a certificate of insurance before the tenant takes possession and again at every renewal. A certificate is a summary of the coverage the policy actually provides. Your agent can show additional insured status, waiver of subrogation or primary and noncontributory wording on a certificate only when the policy includes them. A certificate cannot add coverage that is not in the policy, so if the lease requires something your policy does not have, the policy has to be changed first.
Review the Lease Before You Sign
The best time to address insurance requirements is during negotiation. Sending the insurance section to your agent before signing lets you find out which requirements your current policy already meets, which require endorsements or higher limits and what the added cost will be. It also gives you a chance to ask the landlord to adjust requirements that are unusual or out of proportion to the space. Our guides to business owners policies and umbrella insurance for business owners explain the coverages most leases ask for.
Worth Confirming Before You Sign
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What liability, umbrella and other limits the lease requires compared with what you carry now
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Whether your policy provides additional insured status, waiver of subrogation and primary and noncontributory coverage as the lease requires
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Who is responsible for insuring tenant improvements, plate glass and building systems in your space
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Whether rent continues after a loss and whether your business income limit would cover it
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What the indemnity clause asks you to accept and whether your policy would respond to it
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How hurricane deductibles and windstorm responsibility are handled in the lease
This article is general information and is not legal advice.
Talk to Prestige Insurance Group
Prestige Insurance Group reviews commercial lease insurance requirements for Florida tenants before they sign, and we adjust coverage so that certificates match what landlords and property managers ask for. If you have a lease in front of you, send us the insurance section and we will tell you what your current policy meets and what needs to change.
Call the office nearest you. Se habla español.
Orlando: 407-993-2331
Miami: 305-969-8776
Stuart: 772-247-3788
Prestige Insurance Group, License L057894
