Landlords and building owners commonly require tenants to name them as additional insured. The additional insured endorsement, along with the lease indemnity agreement, are designed to protect the building owner from liability claims that result from the tenant’s activities. In recent years, the additional insured endorsement commonly issued to landlords (ISO CG2011) has undergone several revisions. These revisions could limit the scope of coverage afforded to landlords and are important to understand.
The latest version of the ISO CG2011 was issued in 2013 and, as respects the landlord as an additional insured, reads as follows:
If coverage provided to the additional insured is required by a contract or agreement, the most we will pay on behalf of the additional insured is the amount of insurance:
Whichever is less.
The verbiage added in 2013 is underlined. A careful reading of this revised wording will reveal a few potential issues for landlords and building owners. Under the 2013 form, the landlord is afforded coverage no broader that what is required by contract (the lease). And, the limit of coverage available to the landlord is no more than what is required in the lease, even if the tenant carries higher limits.
We recommend several best practices to help building owners protect themselves from liability claims that occur on the property:
The 2013 revisions to the landlord additional insured endorsement only underscore the importance of carefully drafting lease documents, especially the indemnity clause and insurance requirements.
Link to CG2011 04/13
There are several contributing authors here.