What is Tenants Legal Liability Insurance?
It’s a contractual obligation. In almost every commercial lease, landlords will require tenants to provide evidence of tenants’ legal liability insurance. But what is Canadian tenants’ legal liability insurance? The answer is that Canadian tenants’ legal liability insurance is no different than tenants’ legal liability insurance in any other geography. Ultimately, it is protection for the landlord for unintentional damage that tenants may cause to their building.
What does Tenant Legal Liability Insurance cover?
As a tenant, Tenant Legal Liability insurance is a guarantee of sorts for tenant liability in case you or one of your employees is responsible for damage to the building where your business leases space. Consider the following scenarios:
- You own a retail business and an employee on a lunch break puts aluminum foil in the microwave and leaves the breakroom. The microwave catches fire which quickly spreads. Significant property damage is done to your unit and possibly others in the same plaza. The plaza owner’s insurance company sues you for the costs to repair the property damage.
- You operate a warehouse as part of your business and an order picker driving a forklift accidentally backs into a rack with enough force to cause it to become unbolted from the floor and fall over or crashes his forklift into a wall causing structural damage to the building. The building owner’s insurance company sues to recover the repair costs.
Of course the above are just examples, any number of unexpected accidents can occur at your business that can cause damage to your unit and neighbouring properties as well, which raises the need for tenant insurance. The costs to repair those damages, because they happen on commercial property, can easily reach a level that no business can afford and that is the reason tenants’ legal liability is important. Your landlord may insist on your business carrying a tenant’s insurance policy – to ensure that both your business and the commercial property have legal liability coverage and are protected. Even if there is no such clause in your lease policy, having this coverage is a cost-effective way of making sure that an accident at your place of business doesn’t bankrupt your business.
Tenant Legal Liability Insurance Can Cover:
- Costs to repair the damages caused
- Legal costs to defend a lawsuit
- Costs to settle a lawsuit brought against your company
- Orders to pay awards and damages in case of a judgement against your company
And because this coverage is part of a CGL policy, that means your business is also protected from lawsuits and medical expenses related to personal injuries that occur on your property or because of your products or services, other property damages resulting from your business operations and legal claims of false advertising.
Does Tenants Liability Insurance cover Business Assets?
No. Your business would need Commercial Property Insurance to insure the contents of your business including inventory, business equipment, machinery, computers, furniture, office supplies, etc., in case of peril or accident.
How Much Is Tenants Legal Liability Insurance?
The cost for this type of tenants insurance coverage will depend on a few factors including:
- The type of business you’re in
- Where your business is located
- Number of years in business
- Gross revenue and other financial information
- Past claims history
- The size of your space
Is the tenant’s legal liability insurance in Canada necessary?
The fine print. When entering into a commercial lease, a tenant of the landlord accepts responsibility for the damage they might cause to the building during their tenancy. For comfort and certainty as well as because landlords don’t want to rely on their tenant’s balance sheet for damages that could be caused by them to their building. Landlords require tenants to provide evidence of tenant’s legal liability insurance via a certificate of insurance that an insurance broker, such as ALIGNED Insurance, can issue on their clients’ behalf.
Canadian tenant’s legal liability coverage is not a stand-alone insurance product, it is actually just one of many parts of the typical Commercial General Liability Insurance policy which is a common product that nearly every business carries.
One important thing to note is that often landlords don’t actually secure evidence that their tenants have sufficient limits as required by the lease.
Often the CGL Insurance per occurrence limit is the only limit typical insurance brokers will evidence on a certificate of insurance. However, often the tenant’s legal liability limit within the commercial general liability insurance policy is considerably less. And often, it doesn’t meet the requirements of the lease or sufficiently protect the insured for their exposure.