As a commercial landlord, you provide the building space needed for other business owners to successfully conduct their operations. Yet, the risk of a tenant filing a lawsuit against you for any property damage or bodily injury they sustain at your building—whether it resulted from vandalism, theft, a slip or trip incident, a weather disaster, a water-related problem or a fire—is a constant concern. Fortunately, that’s where lessor’s risk only (LRO) insurance can help.
LRO insurance is a form of coverage designed for commercial landlords who rent out their building spaces (e.g., warehouses, offices, apartment complexes and retail facilities) to tenants. An LRO policy can help cover legal expenses that result from a tenant’s lawsuit, as well as reimburse the cost of the tenant’s property damage or bodily injury.
Claims Scenario: Watch Your Step
A commercial landlord who leases their building as an office space for tenants
Several tenants in a commercial landlord’s building utilize a main hallway to get to their leased office spaces. But after a lightbulb burns out, this hallway becomes poorly lit, thus reducing visibility and creating a safety hazard.
As one of the tenants walks to their leased office space one morning, they lose their footing in the hallway and trip onto the floor. The tenant sustains a broken leg from this incident. Afterwards, the tenant files a lawsuit against the commercial landlord, claiming that the landlord neglecting to change the lightbulb and properly illuminate the hallway caused the injury.
LRO insurance in action:
Slips and trips are some of the most common injuries, and can happen at any building. After all, a range of property concerns—including damaged floors, uneven surfaces, poor lighting and wet or icy conditions—can all lead to such injuries. In these instances, a commercial landlord could be held responsible for failing to safeguard their building and protect their tenants from slip and trip hazards.
Nevertheless, LRO insurance can provide necessary assistance in such a scenario. Following an incident like the one described above, LRO coverage can offer a commercial landlord much-needed financial protection for the legal costs of a tenant’s lawsuit, as well as help recoup the medical expenses that arise from their injury.
Claims Scenario: Window Shopping
A commercial landlord who leases their building as a retail facility for tenants.
To secure their retail facility after hours, a commercial landlord utilizes an alarm system. However, this system must be activated each night in order for it to remain effective.
One evening, the alarm system is inactivated. That night, criminals break into the retail facility without triggering the alarm and vandalize the property, smashing the windows of a tenant’s leased space and destroying multiple merchandise display shelves. Upon discovering the damage, the tenant sues the landlord, claiming that the damage resulted from the landlord failing to activate the alarm system and subsequently secure the building from trespassers.
LRO insurance in action:
A variety of events can lead to property damages for a commercial landlord’s tenants. In these cases, there is a possibility that any of the tenants could blame the landlord’s actions (or lack thereof) for either causing or exacerbating the resulting damages.
Whether tenants’ property damages stem from theft, vandalism, a fire, adverse weather or another covered event, LRO insurance can equip commercial landlords with a crucial layer of protection if their tenants sue them for such damages—helping cover both legal fees and the cost of repairing or replacing the damaged property.
Learn More About LRO Insurance
Some commercial landlords wrongly assume that their standard commercial insurance policies alone—namely, general liability coverage and commercial property coverage—will adequately protect them against landlord-specific risks. While these policies are certainly important to have, they are not acceptable substitutes for LRO insurance.
Specifically, general liability coverage offers protection for lawsuits brought on by third parties (e.g., visitors) who experience property damages or bodily injuries at a commercial landlord’s property—not such legal action from tenants. Further, commercial property insurance can cover property damages caused by unexpected events—not damages caused by a landlord’s own wrongful acts (e.g., poor property inspection and repair procedures or inadequate precautionary measures).
With this in mind, it’s vital that commercial landlords secure both traditional insurance policies and LRO coverage to maintain robust protection against a range of potential risks. Contact us today for additional insurance guidance and solutions.
Benefits of LRO Insurance
LRO insurance is only applicable for commercial landlords who lease the majority of their building spaces to tenants. That being said, LRO policies are developed with landlords’ particular risks in mind and can often be tailored to the specific type of building being rented out.
Protection Against Fires, Water Damage and Weather Events:
If a tenant blames a commercial landlord for any damages or injuries incurred on the landlord’s property after a fire-, water-or weather-related disaster (e.g., failure to protect the pipes from bursting in freezing temperatures), LRO coverage can offer protection for the resulting costs.
Coverage for Theft and Vandalism Incidents:
In the event that a tenant sues a commercial landlord for any damages or injuries obtained on the landlord’s property following a theft or vandalism incident (e.g., utilizing a faulty security system), an LRO policy can help with the associated expenses.
Reimbursement for Tenants:
In addition to protecting commercial landlords, LRO insurance offers benefits for tenants as well—reimbursing them for damages or injuries sustained on their landlord’s property. However, it’s important to note that most LRO policies still require tenants to secure their own property and liability coverage rather than simply rely on their landlord’s insurance.
Legal Expense Assistance:
The legal fees that accompany tenants’ lawsuits can be significant. LRO insurance can assist with these expenses, protecting commercial landlords from potential financial setbacks following such legal action.