Damage to Premises Rented to You – General Liability
March 24, 2017
Author: Emily Medinger, Account Manager
Commercial General Liability is a policy often overlooked by motor carriers. Most companies have the policy in place but do not know how coverage applies, should there be a claim. General Liability is an important line of coverage that protects companies against liability claims for bodily injury, property damage, advertising liability, and personal injury liability. This article focuses on the relationship between damage to premises rented to you sublimit of the General Liability policy, coverage under this line and whether it protects all company responsibilities, should there be a claim while renting or leasing a building.
There is an exclusion within a Commercial General Liability policy, which eliminates coverage to property owned, rented or occupied. However, this exclusion does not apply to damage caused by fire. The Commercial General Liability policy previously held the name Fire Damage Legal Liability, for this exact reason. The sublimit for rental property damage is only available if fire caused the damage to the rented premises or if the rental is short term (usually 7 days or fewer) when the damage occurred and caused by anything other than a fire. Under both of these two exceptions, coverage will only pay out if the insured is found liable in a court of law and coverage will only be paid at the amount listed on the declarations page of the policy.
If a fire occurs in the building you rent from your landlord, you will probably ask yourself if you have coverage and how much. If the sublimit listed on your policy, regarding damage to premises rented, is $100,000 and the windows and walls of the building are completely ruined, you could be in trouble. Under the circumstances the fire spread to different parts of the building where there are other tenants, the sublimit in the Commercial General Liability policy will not pay for other damaged portions of the building. The each occurrence limit, usually $1,000,000, will cover this situation. Any property damage paid under the damage to premises rented to you sublimit will reduce the each occurrence limit and reduce the general aggregate sublimit of the Commercial General Liability policy.
So, how do we better protect ourselves from potential claims? Should the damage to premises rented to you sublimit be the value of the building placed at $1,000,000? While the number is important, it is also important to remember that coverage under this sublimit only applies to damage to the rented premises. This sublimit does not cover any of your inventory that is lost in the fire. In the case of lost inventory, a Commercial Property policy should be in place. A Commercial Property policy would also protect you from potential claims that caused by anything but a fire: such as water damage, floods or earthquakes.
To determine which coverage options are best for your particular situation, you should work directly with your insurance agent so they may explain which policy would be appropriate and work with you to make sure you are not underinsured.