Tenants Legal Liability: Is Your Business Running in a Rented Premises? Then You Should Know This:

What if a fire happens in your commercially rented premises, and you are held responsible by the landlord? The common risk in the workplace is a fire accident, which can occur due to your employee’s negligence or poor maintenance of the rented premises. The property owners might hold the tenant liable for the damage caused by the accident and bring legal claims against them. Even if the landlord has a basic fire policy for the building, the losses to the interiors will be the liability of the tenant. In case the landlord’s insurer settles the claim and then comes for recovery to the tenant citing subrogation, the risk of paying for the loss might still fall on the tenant. To cover this risk, there is a policy called Tenants Legal Liability.

This coverage is an extension under the Commercial General Liability (CGL) policy. What does Tenants Legal Liability Coverage Mean? A Tenant’s Legal Liability policy covers the loss or damage of a property resulting from an action of a person renting space at that property. To cover the tenant’s own contents present in the rented premises, such as furniture, fixtures, desktops, laptops, and servers, the tenant should buy a separate fire policy. The Tenant’s Legal Liability can be underwritten to only cover losses caused by the tenant and resulting from fire, smoke, explosion (limited), and leakage from water sprinklers. As a rider or extension, this coverage can be obtained under a Commercial General Liability policy, subject to a deductible.

Tenants must be aware that just because the owner or landlord has liability insurance, it may not be enough to protect the tenant against claims made by the landlord’s insurer. Often, the tenant liability policy will provide the right coverage to protect against the landlord’s insurer. This policy works even if the tenant is not directly responsible for the accident (e.g., a disgruntled employee of the rented office causing a fire). There is also coverage for incidents of bodily injury in the Commercial General Liability (CGL) policy. If a customer comes in and trips over a wet floor and your business is found legally liable for their injury, this CGL policy will provide coverage to the third party while they are in your premises.

In conclusion, CGL policies are the norm in foreign countries, but awareness about them is minimal in India. A CGL policy covers third-party bodily injury or property damage happening in your business premises or due to your business operations. The legal liability towards the landlord also gets covered under the Tenants Legal Liability Extension. Even though the possibility of a third-party bodily injury in your rented office premises is negligible, every rented business should have a CGL policy to cover the liability towards the landlord.