A blog question on public liability leads to 3 issues around leases.
A broker contacted me following a concerned client of hers who had been joined in an action where someone had fallen over a step in a commercial body corporate complex. The broker was not aware of the client owning a commercial strata in the complex.
The Strata insurer was prepared to defend the body corporate but not the individual unit holder.
When I was approached I asked if the client had a public liability policy for the business that I assumed that they were operating from the premises. The broker wrote back explaining that the client leased the premises out to a restaurant owner.
This gave me a possible solution to the client’s problem. I called for the lease and found what I was hoping for at clause 20; I reproduce the relevant section below:
When I pointed this out to the broker she was able to track down the broker for the restaurant and determine that public liability insurance was in place in both the name of the tenant and the landlord.
On approaching the insurer concerned they agreed to indemnify the parties to the great relief of the landlord (broker’s client) and the broker who contacted me.
In all the insurance program reviews I conduct I always get the leases to see what exposures that this creates for the various parties.
Here, the requirement is for the tenant to have an Industrial Special Risks policy. As I understand it, this was not possible and that a business pack was in place.
My recommendation to the broker and client was to not only review all the leases but to arrange a separate liability policy covering the client as a landlord/property owner. While this may cause dual insurance, it does protect the client should the premises become unoccupied at any time or if the tenant fails to renew their own insurance. My own approach to insurance is that it is my asset, my exposure when it comes to liability and so I want to control the protection and ensure it is in place and matches my very conservative risk appetite.
We also find that more and more often, the landlord has, foolishly to my way of thinking, abrogated their responsibility for insurance to the tenant. This can be for arranging the insurance on the building (not in a strata situation) and the loss of rent.
If this is missed it creates an exposure under contract for the tenant even if they had nothing to do with the cause of the loss/disruption and a potential action against the broker for negligence. I have seen this happen several times over the past few years.
The other exposure is to the landlord, who thinks they are being so clever by transferring the risk of under insurance to the tenant, only to find the tenant has not arranged insurance and do not have the resources to fund the repairs to the building and or loss of rent.
This was a valuable lesson for the broker in this case and a good ending for this landlord.