Most sports / recreation associations lease office space for the purpose of conducting their operations. These lease agreements contain numerous insurance and risk management considerations that must be addressed up front before entering into the lease or reviewed after the fact if the lease has already been entered into. It is customary for the landlord to require the tenant (association) to carry the following types of insurance policies to protect the interests of the landlord:
• General Liability Insurance in the amount of $1,000,000 combined single limits to protect against bodily injury, property damage, personal injury, advertising injury, and damage to premises of others in the amount of $300,000. It is usually required that the landlord be named as “additional insured.”
• Property Insurance may be required to be carried by the tenant to protect the replacement cost value of tenant’s improvements and betterments, contents, and sometimes building (in the event of a net lease) under the “special perils” coverage form. On occasion, it is required that earthquake and flood insurance be carried. Also, the tenant may be required to insure the glass against breakage and the heating, air conditioning, electrical, and plumbing systems against mechanical breakdown. If this is the case, the Property policy of the tenant must be endorsed to specifically provide coverage for glass and mechanical breakdown.
• In the spirit of efficiency and reciprocity, most well-written leases should contain a “waiver of subrogation clause” whereby both parties agree that if their property insurance company pays the claim, that such insurance company will waive its subrogation (or lawsuit) rights against the other party in order to recoup the loss. Sadler & Company can provide the sample wording for this provision.
Most well-written leases will also contain an indemnification/hold harmless provision whereby each of the parties agrees to assume the liability and legal defense cost of the other party for lawsuits arising out of each party’s own negligence. In many cases, since the landlord is the party in power, this provision is often heavy-handed in their favor and should be negotiated on a more reasonable basis.
So why should you care if your lease contains insurance requirements that you’re not meeting or unreasonable contractual liability assumptions through hold-harmless/indemnification agreements? Of course, these considerations don’t matter until a problem arises, but it is too late to do anything about them after-the-fact.
Within minutes, Sadler & Sports Recreation insurance can review your lease agreement and make recommendations based upon your own unique situation. If you are interested in a no-obligation review, please call us at 800-622-7370.
