Every commercial lease includes an insurance requirements section that specifies the minimum coverage tenants must maintain to protect both themselves and the landlord in the case of a loss event.
All of the insurance requirements listed in the lease are integral to mitigating risk for both tenant and landlord and need to be represented in the tenant insurance policy.
Surprisingly, over 70% of tenants submit proof of insurance that is not compliant with the requirements of their lease.
We are CertiSync and we know tenant insurance. We have been processing tenant proof of insurance for our clients for over 10 years. During that time, we have successfully and efficiently processed thousands of tenants to compliance with the insurance requirements of their lease.
Our data tells us:
70% of tenants submit proof of insurance that is not compliant with their lease requirements: The majority of tenants submit their proof of insurance in the form of a Certificate of Insurance or COI. The COI is a one or two page summary of tenant coverages. Every insurance requirement listed in the tenant lease can and should be represented in the tenant COI.
71% Additional Insured Incorrect: The largest area of concern is the correct naming of the Additional Insureds. An Additional Insured extends liability insurance coverage beyond the named insured to include the landlord, REIT and property management. An additional insured endorsement protects the additional insured under the named insurer’s policy, shielding them from subrogation and allowing them to file a claim if sued.
60% Certificate Holder Incorrect: The Certificate Holder is to receive notification of any policy changes from the insurer. If the tenant should alter or discontinue coverages, the Certificate Holder would be notified.
45% No Business Interruption: Business Interruption insurance is coverage that replaces a tenant’s lost net income if the business is forced to close for repairs after a loss event.
41% No Property Coverage: Property coverage, more commonly referred to as “All Risks”, is a property insurance that covers tenant assets for any loss arising from any fortuitous cause, except those that are specifically excluded. All Risks coverage is written into tenant leases because this type of coverage is essential to business continuity for the tenant, allowing them to replace lost assets in the event of a major incident. Landlords and tenants want tenants to be capable of resuming operations quickly after an incident.
37% Other: “Other” represents unique clauses or policy coverages stated in individual leases. These requirements are often policies such as plate glass, boiler & machinery, owned and/or un-owned auto, etc.
A further area of confusion related to tenant insurance compliance management is the existence of the legacy lease. These are tenant leases signed with a previous landlord. The existence of these legacy leases will mean that not all tenants within a portfolio will have the same insurance requirements, even if they are within the same building.
Having proper coverage is crucial. Tenants don’t want to discover their insurance is inadequate after a major loss event. That’s why property managers must be proactive and diligent in their management of tenant insurance compliance. But with hundreds of tenants and thousands of requirements to track, how can property managers keep up?
If your organization lacks the manpower or knowledge base to verify all the tenant insurance requirements, at minimum you should ensure these basic requirements are satisfied:
- Check dates to ensure corresponding coverage is current. Each coverage listed in the tenant COI will have corresponding effective and expiry dates.
- Ensure Commercial General Liability (CGL) is represented on the tenant COI. This coverage protects the tenant against damage to others and/or the property of others. It also protects the landlord if they are properly represented as a listed Additional Insured.
- Make sure the Additional Insureds are correctly listed in their legal name. An additional insured endorsement protects the additional insured under the named insurer’s policy, allowing them to file a claim if sued.
Ensuring that even these few requirements are met by tenants can reduce risk to both tenant and landlord. The only way to truly minimize risk is to enforce all insurance requirements listed in the lease. If you want to help your tenants verify their coverage and ensure they are properly insured, you may consider outsourcing to experts.
That’s where InsuraSync can offer significant value. Developed in-market over the past decade in collaboration with landlords, property managers, insurance brokers, insurers, and tenants, InsuraSync is a comprehensive process for managing tenant insurance compliance. As the market leader, it’s the only true tenant submission-to-compliance solution available.
In collaboration with your property management team, CertiSync creates an online tenant insurance registry, enabling tenants to securely submit proof of insurance to their online profile. The CertiSync Compliance Team then reviews each submission, comparing it to the specific insurance requirements outlined in the tenant lease. Tenants are notified by email if their submission is compliant. If not, CertiSync works directly with the tenant and their broker to resolve any deficiencies until compliance is achieved.
InsuraSync enhances this process with robust reporting capabilities. Property managers receive a daily tenant status report, organized by area, that outlines each tenant’s insurance compliance status, including details of the most recent communications.
As a proven, powerful tenant service, InsuraSync helps tenants, who are often not insurance experts, by auditing their policies and confirming that the required coverages are in place. This gives tenants peace of mind, ensuring they are adequately protected.
InsuraSync delivers a consistent, centralized, and highly effective solution to the pervasive challenge of tenant insurance verification in commercial real estate.
