Insurance for damage to a property rented by your business

As a small business owner, one of the primary insurance coverages you’ll need is called Commercial General Liability (CGL). This is a type of insurance that protects you from lawsuits if you or your employees are responsible for damage or injury to a third party.

But don’t be fooled. Standard CGL coverage has a number of exclusions (things that specifically AREN’T covered), and among them is any damage you cause to a property that you rent or lease. For this very real risk, you need Tenants Legal Liability (TLL) Insurance.

Most insurance providers may include this coverage as part of your CGL policy, but you can’t take that for granted, and even if you do have this coverage, you could have a limit as low as $250,000. This may be insufficient.

What’s covered by tenants legal liability insurance?

  • Flooding – Your business is renting an office on the second floor of a medical building. One of your employees leaves a sink running overnight, and this causes extensive water damage to your unit and to the unit directly below yours. Tenants Legal Liability insurance will cover the damage to your unit. Damage to properties that you are not renting (the unit below) would be covered by CGL.
  • Fire/explosion – You rent a building that has an outdoor lunch area with picnic tables. As part of a team building event, one of your employees brings in a propane barbecue to cook burgers and sausages to serve at the event. Due to a flaw in the propane tank, there is a fire and explosion that damages the outer wall of the building, requiring significant repairs worth $125,000. Because you rent the entire building, this damage would be covered under TLL.
  • Smoke damage – One of your employees leaves a toaster oven on overnight in a unit you rent in an office tower. Smoke damage leads to $13,500 in cleaning and repainting costs in your unit, plus an additional $35,000 in damage to the adjoining units. Your CGL policy would cover the damage to the other units, but you would need tenants legal liability coverage to pay for the damage to your own unit.

Who needs tenants legal liability insurance?

Any business that rents a space, whether it be an office, warehouse or shop, needs to have TLL insurance as part of their larger business insurance policy. If you know that you do have TLL as part of your liability coverage, make sure that the coverage limit is sufficient for your needs. Although you may have $2 million in CGL coverage, your TLL limit may be considerably lower. Make sure your limit is such that it could pay for a complete rebuild of the space you are renting.

It can be hard to know what coverages you already have and which ones your really need. Our experienced business insurance brokers would be happy to go over your existing coverage and advise on whether it is sufficient. Give us a call today!

Frequently asked questions

Doesn’t my CGL policy cover me if my employees cause damage to the office we’re renting?

No. Damage to a property that the business owns, rents or leases is typically excluded from CGL policies.

Does Tenants Legal Liability cover damage done by my employees to the landlord’s furniture?

Yes. If furniture and fixtures are included in a lease agreement, they would be covered by TLL.

What’s the difference between tenants insurance and tenants legal liability insurance?

Tenants insurance usually refers to a policy that a residential tenant would have that would include a certain amount of liability coverage as well as coverage for the tenants contents. Tenants Legal Liability is a type of business insurance for businesses that rent space, and it is specifically meant to cover the space that you’re renting if you or your employees cause damage to it.

Your business is unique, so are your insurance options.

Being an outlet for over 70 of Canada’s top insurance companies means our commercial experts have access to a wide range of coverage options as unique as your business – at the best rates in Ontario. We sweat the details so you can focus on your business. Want to learn more about the coverage options available to you? Here’s a few of them.