Absolute Triple Net Lease....Should the Lessor Carry Insurance?
For the past 20 years I've had an absolute NNN leased with a major QSR.  The lessee has paid all building improvements, property insurance (with my name listed on the lessee's insurance as additionally insured) and I have been largely hands off and just collecting rent which has been lovely. Recently an insurance broker contacted me and was urging me to get independent liability insurance saying this was  necessary and surprised I wasn't already independently carrying insurance on this property (outside of the leesee's insurance).......it seems odd to me I would need additional insurance ontop of the lessee's insurance but what is recommended in this situation and are they feeding me a bunch of bs?
[{"id": "h5gizic", "text": "I believe the distinction between the two policies is one covers the improvements if they were destroyed (the one the tenant is paying) and one will cover you if someone injured themselves on the property and chooses to peruse legal action against you the property owner. It\u2019s hard to know without reading the insurance policy the tenant has in place to know if it\u2019s covered.", "replies": [{"id": "h8o1y9p", "text": "Generally you can\u2019t have a building policy with a general liability component.", "replies": [], "depth": 2}], "depth": 1}, {"id": "h5gjubh", "text": "You definitely need insurance as the owner.", "replies": [], "depth": 1}, {"id": "h5glzm9", "text": "Someone else mentioned that the language of the insurance policy the tenant has in place may or may not cover premises liability claims against you as the owner.\n\nWhile that is true, the language of the lease may come in to play as well. If the lease requires the tenant to indemnify you for premises liability claims made against you as the owner, then the tenant's liability insurance should cover you as the liability would be the tenant's and would arise out of an insured contract.\n\nI am surprised that the lessee can get property insurance for the structure. I would figure that you would carry that yourself and have the tenant reimburse you for the expense through CAM.", "replies": [{"id": "h5go81j", "text": "I agree with all of the above, but even if indemnification is included in the lease - what if: tenant coverage lapses, tenant goes BK, fails to maintain the property, someone is injured. Their insurance is gone, indemnification is worthless, LL is on the hook to some degree.\n\nTo your last point (and the above hypothetical), always better to obtain it yourself and pass it through.\n\n\"Major QSR\"...is the lease with the corporate parent? Or LLC shell company 0101-5?\n\nLast thought- the true test for OP would be seeing if their liability umbrella policy would cover a claim based on OP's set of facts. I suspect not.", "replies": [], "depth": 2}], "depth": 1}, {"id": "h5gqjk3", "text": "We do buy structure and rental income and liability insurance. We get slip and fall and bullshit claims from the parking lot every year.\n\nI'd say, yeah, you probably need insurance.\n\nWe bill the insurance costs back the tenants as part of the operating costs. \n\nAs with everything in life, it depends", "replies": [], "depth": 1}, {"id": "h5gz0q1", "text": "Personal experience here. National tenant. Absolute NNN deal. Kitchen fire. No requirement to rebuild. Tenant elected not to rebuild. Ran out last 6 months of lease paying rent. It\u2019s worth the money to pay for your own insurance.", "replies": [{"id": "h5hao5y", "text": "wow", "replies": [], "depth": 2}, {"id": "h5hkprp", "text": "Wow. Thanks for sharing that", "replies": [], "depth": 2}, {"id": "h5i52sb", "text": "Wouldn't there be language in the lease that obliges the tenant to return the premises to you in original condition+/-? A burnt down kitchen (and related smoke damage etc) would violate that pretty standard clause. Or did they just pass their insurance money to you instead of rebuilding?", "replies": [{"id": "h5jdw2q", "text": "Some leases have clauses that do not require them to rebuild. This was a ground lease originally.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "h5hbn1s", "text": "\\+1 for you should absolutely obtain your own. I read the title and was surprised to learn a building owner wouldn't. Get it and add it to your passthrus as others have noted.", "replies": [], "depth": 1}, {"id": "h6zfmgg", "text": "There is a lot to unpack here:\n\n1) It seems to be that you are asking about liability insurance, but a lot of the answers are speaking about property insurance. These are two different products and policies. A GL policy covers damage and injury occurring on the insured premises (i.e: slip-and-fall), but will not cover your rebuilding expenses in the event of a casualty (such as a fire). Property insurance will cover damage to the insured premises in the event of a casualty, but will not cover damage or injury occurring to third-parties on insured premises. Both are important to have as a landlord and as a tenant.\n\n2) It's not clear from your post as to whether the tenant is leasing the entire property or just a portion thereof. If the tenant is not leasing the entire property (maybe a parking lot or some other common areas remain yours), you need both insurance policies on the property as the tenant's policies wouldn't cover any areas which are not included in the lease.   \n\n3) If the tenant is renting the entire property, then you might be able to get away without having your own insurance, but you want to make sure that the tenant's insurance and indemnity responsibilities under the lease are water-tight, and that the limits are sufficient. You also want to make sure that their policies are written properly (watch out for exclusions), that you are protected by the coverage, and that the policies are active. \n\n4) You didn't ask about property insurance, but that's also an important consideration. Do you know what coverage is required under the lease from tenant? If the lease is 20 years old, I hope that at some point the limits were increased. You don't want to find out after a casualty that their coverage doesn't even begin to cover the extent of the damage. Also, do you know what the lease required the tenant to do following a casualty? Maybe they don't have an obligation to repair, or worse, maybe you have the obligation to repair, but not the funds.\n\nBottom line is that it probably makes sense to have an experienced lawyer look over this for you. Maybe everything is fine, but maybe you're opening up yourself to a lot of liability to save a few dollars. \n\n**Disclaimer: This reply is informational purposes only, does not constitute legal advice, nor is it intended to create, nor shall the receipt of such information constitute, an attorney-client relationship.**", "replies": [], "depth": 1}, {"id": "h7b3gbz", "text": "1) Get an umbrella policy. Any teip and falls or accidents, the plaintiff goes up the line suing anyone they can. You will be sued as the owner if the tenant causes any mishaps.\n2) Your insurance should cover your building, the asset- without contents like inventory (belongin to tenant)   If the tenant causes a fire and the building is dust, how do you rebuild?", "replies": [], "depth": 1}, {"id": "h8rdwgt", "text": "Is there a indemnity and hold harmless clause in your lease?", "replies": [], "depth": 1}]