Sneaky Tenant Outsmarts Landlord Leaving Warehouse Owner on the Hook for Pricey Roof Collapse

Lawsuit Summary:

A warehouse owner was denied insurance coverage in the case of a roof collapse because the tenant knowingly evaded listing the owner as an additional insured even though their lease required them to, and the owner did not object before the loss occurred.

The tenant requested the insurer to list its own owner as the building owner, potentially to secure lower insurance premiums. This suggests the “error” was intentional, preventing the landlord from recovering under the insurer’s errors and omissions policy.

The policy was consistently renewed without objections from the landlord, so ultimately the court ruled that the landlord had no right to coverage from the tenant’s insurer, even if the tenant breached its contract by failing to list the landlord as an additional insured.

Insights from Alex Kario, Director of Operations at Jones

  • The case demonstrates that obligations established by a lease are not necessarily sufficient in themselves to protect the landlord. Landlords remain liable for enforcing the insurance requirements stipulated in a tenant’s lease and verifying compliance.
  • Failure to comply with insurance requirements can be intentional and does not necessarily constitute error. In such scenarios, an insurers’ errors and omissions policy therefore remains out of reach.
  • Landlords must be proactive and early in objecting to breaches of lease obligations. If these matters are overlooked, the consequences can be expensive.

Shameless Plug: How Jones Verifies Additional Insureds

Jones’ dedicated insurance experts would have prevented this discrepancy by working with the landlord to:

  • Extract additional insured requirements from the lease
  • Set up customizable standards for reviewing additional insured.
    • Is it enough to look at the checkbox in the AI column, or should it be checked in description of operations, the AI endorsement for ongoing operations, and the AI endorsement for completed operations?
  • Use a combination of artificial intelligence and human insurance expertise to check COIs for compliance

Here’s how our commercial real estate customers improved their additional insured compliance rates after a year of managing COIs with Jones:

Schedule a call today so Jones can help make sure a situation like this case doesn’t happen to you!

All legal information sourced from Law360.

How to Identify a Fraudulent COI in Six Easy Steps

We’ve spoken to members of the property management community who mentioned that they struggle to identify fake certificates of insurance, so we made a video highlighting what to look for when verifying the authenticity of a COI.

Until next month!