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 commercial general liability (CGL). It protects you from lawsuits if you or your employees are responsible for damage or injury to a third party.
CGL coverage for a company that rents space typically includes tenant legal liability, but you can’t take that for granted, and should always ask. Even if you do have this protection, you could have a limit as low as $250,000, which may not be enough. When getting a quote for business insurance, we’ll go over all of your risks and make sure you have the right amount of coverage in all areas, including tenant legal liability.
What’s covered by tenant legal liability insurance?
To better illustrate how tenant legal liability coverage works within a larger commercial insurance package, consider the following scenarios:
- 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. Tenant legal liability insurance will cover the damage to your unit. Damage to properties that you are not renting (like the unit below) would be covered by another broader coverage under CGL, for bodily injury and property damage to third parties.
- 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 for everyone. 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 that cost $125,000. Because you rent the entire building, this damage would be covered under tenant legal liability.
- 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 tenant legal liability coverage would pay for the damage to your own unit, and the damage to the other units would be covered under bodily injury and property damage.
It may not seem important which coverage pays for what damage. But if you don’t have all the relevant coverages, your business could find itself having to pay for certain damage out of pocket. That’s why you need a commercial insurance expert to help you make sure all your bases are covered.
Who needs tenant legal liability insurance?
Any business that rents a space, whether it be an office, warehouse or shop, needs to have tenant legal liability as part of their larger business insurance policy. If you have tenant legal liability as part of your policy, make sure the coverage limit is sufficient for your needs. Although you may have $2 million in CGL coverage, your tenant legal liability limit might be considerably lower. It’s important to ensure 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 you really need. Our team of experienced business insurance experts would be happy to go over your existing coverage and advise on whether it is sufficient. Give us a call today.
Good to know: Common questions about tenant legal liability insurance
Doesn’t my CGL policy cover me if my employees cause damage to the office we’re renting?
Not necessarily. Damage to a property that the business owns, rents or leases can be excluded from CGL policies. Always make sure that tenant legal liability is part of your policy and that the limit would cover a complete rebuild of the space you’re renting.
Does tenants legal liability insurance 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 tenants legal liability.
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 their contents. Tenants legal liability coverage is a type of commercial insurance coverage for businesses that rent space. It is specifically meant to cover the space that you’re renting if you or your employees cause damage to it.