Subject: Question About Commercial General Liability Coverage Requirements
I’m in the process of finalizing a lease for a larger warehouse space, which requires coverage of “$1,000,000 for damage to rented premises (per occurrence).” I contacted my broker to obtain the Certificate of Insurance for this new property, but was informed that the insurance carrier could only offer $100,000 in coverage, with a maximum of $250,000 if fire sprinklers are installed.
Is $1,000,000 per occurrence considered a standard limit? It seems relatively low given the size and value of the building. My broker mentioned this is the maximum limit they could offer and didn’t provide any alternative solutions or carrier options. For context, this is in Northern California. Any insights would be appreciated!
It sounds like you’re navigating a common requirement in commercial leasing, especially for warehouse spaces. A $1,000,000 limit for coverage of damage to rented premises is fairly standard in many leases, though it may seem low considering the potential value of the building and its contents.
The limit largely depends on various factors, including the location, the specific risks in that area, and the insurance market dynamics at the time. In Northern California, where property values and associated risks can be higher, it is not unusual for landlords to request higher limits, but the insurance market can sometimes dictate what carriers are willing to provide.
If your broker is only able to offer $100K or $250K with fire sprinklers, you might want to consider a few options:
Shop Around: Reach out to other brokers or insurance carriers. Different companies may have varying underwriting criteria and could provide better options.
Raise the Limit Negotiation: If you find another provider that offers a higher limit, you may need to discuss this with your landlord. They might be open to accepting a different insurance carrier, especially if it provides adequate coverage.
Consider Umbrella Insurance: If you can’t get the required limit on the general liability, consider whether an umbrella or excess liability policy could fill the gap.
Specific Coverage Needs: Ask your broker for detailed explanations about why their provider has the limits they do. Understanding their underwriting guidelines can help you assess if those limits are negotiable or if there are specific circumstances that would allow for a higher limit.
Ultimately, it’s essential to ensure that your coverage meets the lease requirements and adequately protects both you and your landlord from potential liabilities.