Why is my landlord requiring me to have Business Insurance? I get this question a lot since lease terms can have many insurance details. Some of which new business owners or veteran business owners are not familiar. Below are a few insurance coverages your landlord might require you to have when you sign a lease.
General Liability Insurance
Your landlord has their own General Liability Insurance to cover their exposure and business. Meaning, their insurance company has a full understanding of what they do. They do not know what the tenants do, so they are not going to cover a risk they know nothing about. Since the building owner could be brought into a potential lawsuit, they are going to want you to have this coverage in force upon lease execution. In addition to having General Liability Insurance, they may also require you to have them, the landlord, listed as an Additional Insured and have a Waiver of Subrogation on the policy.
If there's a fire, and your business isn't operational, you most likely won't be able to pay rent, so your landlord may also require you to have Business Interruption/Business Income. This coverage could be a specific amount or ALS (Actual Loss Sustained).
Business Personal Property
If a loss occurs on premises, your landlord is going to want you to have insurance for your property. Business Personal Property is going to provide this coverage this coverage.
Employees get injured. The last thing a property owner wants is to be brought into a lawsuit for an injury that occurred on the premises. To reduce this exposure, they might require the tenant to have a Workers Compensation policy. Although it's not required in Texas, they still might want you to have it.
Other requirements I have seen, A+ Rated Carrier, Waiver of Subrogation, Tenant Glass, and Umbrella. If you have any questions about these coverages, please feel free to call or email me. When signing a lease, you have a lot to deal with as far as requirements go, we are here to help with the Business Insurance.
Commercial Insurance Agent
Engineers have a lot to contend with when it comes to Business Insurance and claims. The reality is, no business or person is perfect, so accidents do happen, and given the litigious society we live in today, claims come with those unforeseen accidents. It's important to have the right policy in place for coverage, but it's also good to have a plan in place to reduce insurance claims. Once you have a contract in place, here are 3 Ways Engineers can Reduce Insurance Claims.
1. Quality Control: Another set of eyes on your work.
Some people do not like to have others check their work, however, it can go a long way when you do. After all, we are all humans, and none of us are immune to human error. Engineers are under a tremendous amount of pressure these days when it comes to projects. Have a senior person, or qualified person, within your organization check your work. If that is not possible, consider the services of a qualified consultant. Yes, this might be an additional cost to the project that could cut into profits or add more time, but it's better to be safe than sorry. Two sets of eyes are better one.
2. Communicate. Keep the lines of communication open and manage expectations.
The last study I read, communication was the number one reason for engineering claims in the industry. This isn't surprising since another study showed the number one thing clients want from design professionals and engineers is, you guessed it, better communication. Review and manage the scope or work, schedule of work and the cost of work with your client. Find out the clients preferred form of communication and secondary form of communication. If there are problems, respond proactively and promptly. Make sure to return phone calls within 24 hours (obviously earlier the better), even if it's just to say you are still working on it. Let them know they haven't been forgotten by simply telling them, I haven't forgotten about you. I know when people tell me this, I appreciate it. Nobody likes to feel like they've been forgotten.
3. Document. Document. Document.
We've all heard this one before, but it's always a good reminder. Always document when you've presented or discussed the scope, schedule, cost and/or any other important information. Things change, make sure to document them. It's easy to forget phone conversations these days when we're taking a call while driving or multitasking. Request an email for any changes. Always consider what is really being asked and do not give an off the cuff answer. If they are major changes to the project, request a meeting. After the meeting, send a follow up email titled "Action Items" with documentation of the change in scope of work and ask the client to confirm receipt of the email.
These are just a few things that might help reduce insurance claims. If you would like more information on ways to reduce claims, please let me know. Be aware that contractors will most likely go after the design professional if they are brought into any kind of law suit, so it's very important to try to reduce your exposure. We represent insurance carriers that offer training on this subject, and other value-added services, your firm will benefit from. Some of these services include webinars and contract review. If you are not getting this from your current carrier, you should ask your agent or broker why. We work with a lot of engineers when it comes to Business Insurance and would be happy to help with your needs. Be sure to read Insurance for Engineers for more information related to this subject.
Always remember, failing to plan is planning to fail. And hope is not a plan.
Commercial Insurance Agent
Inside the limits or outside the limits might not sound all that important, but when a claim occurs, it can be extremely important when it comes to Business Insurance. When considering your liability policy (General Liability, Professional Liability, etc.), you should look at this option very carefully. Simply put, it refers to costs of legal defense and how they are calculated based on your liability limits. Lets look at this in more detail below.
Inside the Limits
Lets say you have liability limits of $1,000,000 and you have been brought into a lawsuit that is going to require substantial legal defense costs. Inside the Limits means the legal defense costs are inside or included in the $1,000,000 per occurrence maximum that the insurance company is going to pay out. So if the carrier pays out $150,000 in defense costs, and you are found at fault, this leaves $850,000 to pay in damages. If damages exceed this amount, the business will have to handle since the insurance company has fulfilled their obligation.
Outside the Limits
Conversely, Outside the Limits means defense costs are outside the $1,000,000 limits. Meaning defense costs have their own limits like the General Liability Insurance.
Obviously choosing Outside the Limits is going to be the better option for your business. However, it does come at a price, since typically this option is going to be additional premium. It's important to understand which options are available to you and also understand which option you have. Sometimes you'll see "Defense outside the limits" listed as a coverage option.
If you have any questions about Inside the Limits or Outside the Limits or any other Business Insurance questions, please feel free to reach out to us. We are always happy to help.
Commercial Insurance Agent