Insurance Overview for Office Tenants

Insurance is one of the keys to addressing the risk of casualty.  Tenants need to keep in mind and remind the landlord that they are paying for the insurance through their rent either directly as an Operating Expense or indirectly through its gross rent.  

While office leases are drafted by landlords, they impose obligations on the tenant for insurance, but are usually silent on what insurance landlords are required to carry.  Savvy tenants need to carefully review this provision with their risk managers and insurance agents to be sure they have adequate coverage as does the landlord.  Below is a quick recap of key insurance concepts that should be considered in an office lease.

How Tenants Can Prepare for the Unthinkable

Hurricane Sandy devastates the northeast.  As recently reported on Bloomberg (http://www.bloomberg.com/news/2012-11-09/lower-manhattan-quiet-as-sandy-shuts-one-third-of-offices.html) 33% of the 101 million square feet of lower Manhattan’s office space was inoperable as of November 7th, several days after Sandy’s landfall.  Likewise, immediately after 9-11, areas of lower Manhattan were closed off for months.  Manmade disasters and storms are not just limited to New York or the coastal areas.  In 1992, Chicago’s Central Business District was closed for days due to a flood of an abandoned underground tunnel system.  Falling into the trap – “it’ll never happen to me” – many tenants and landlords pay short attention to the lease provisions pertaining to a casualty.  Outlined below are steps tenants can take pre-lease and during lease negotiations to safeguard their interests.   Also addressed below is where there is no damage to the building, but the building is inoperable due to lack of utilities, access, etc.    Most leases, however, do not provide the tenant with any rights if they are denied use of the building without building damage.  Under a separate post, I address what tenants need to know about insurance.

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