I care about my commercial property and have good tenants. Insurance companies don't always agree.

October 16, 2015

What do you mean the insurance company doesn't want to insure me?

I have great tenants, they pay their bills on time and don't complain!

While that may be a good tenant in your eyes that is not the only consideration for the insurance companies. There are two areas the insurance company is concerned about, losses to your property and losses resulting from bodily injury. So let's address Commercial Property Insurance losses first.

How do your tenants affect the likelihood of having a property loss?

It should be obvious that certain tenants are more likely to cause damage to your commercial building than others. For example a retail store has a lower likelihood of damaging the building than a Automobile repair shop. Other tenants might not appear to have a higher likelihood of causing property damage but the insurance company may believe they do (even if there isn't sufficient data to prove their stance).

For example you rent apartments, one tenant has a good job and makes good life decisions the other tenant is receiving rent assistance and has bad life habits (drinks too much, smokes, Etc). The appearance is that both are the same exposure, they rent space used for living purposes. However, the exposures are very different. The second tenant in the apartment building example clearly is more likely to cause a fire that will damage your building than the first tenant. So, the insurance company has to have a way to charge more money for the properties with the higher exposures or they may just say that they don't insure properties with certain tenants (or maybe if there are too many tenants that have higher exposures). It is possible to require tenants to carry insurance that will pay you (the property owner) for damage that the tenant does to your building. This goes a long way in making the insurance company more comfortable with accepting some of these exposures or charging a lower price.

The second area is that of Bodily Injury, or Commercial Liability Insurance claims:

There are primarily two areas of liability of your tenants that can come back to you. The first is that of liability arising out of people coming onto your premise, do you have a tenant with high amounts of pedestrian traffic? Elderly traffic? If those people slip and/or fall in the parking lot or in the common areas that liability is coming back to you and in turn your insurance company.

The second area of concern is liability of your tenants for which your tenant doesn't have insurance protection. Say your tenant is a Tattoo Artist that carries a general liability policy but they don't insure for sexually transmitted diseases and so the tattoo artist's customer sues you in addition to the tattoo artist because they allege that they contracted a sexually transmitted disease from the tattoo artist and your insurance company defends you. Or the apartment tenant doesn't carry liability insurance and the tenant's dog bites someone and the injured party sues you because the bite occurred on your property.

So, both tenant caused property damage (fires) and liability of un or inadequately insured tenant's can be greatly reduced by requiring that ALL tenants carry liability insurance. You can get further protection by requiring that tenants name you (the property owner) as an additional insured on their liability insurance.

I highly recommend that if you are going to change the type of tenant you have that you contact your insurance agent and ask if the prospective tenant will cause any increase in your premium or create an insurance eligibility problem.

If you have any questions about your Commercial Property Insurance or Commercial Liability Insurance protection please feel free to give me a call.

Joe Hershey - Definitive Insurance Solutions, LLC - 717-537-1104