Why Commercial Landlords Should Make Their Tenants Buy General Liability Insurance?

If you're a commercial landlord, you should already have your own insurance to cover things like damage to your building and injuries caused by your own staff. However, you almost always want your tenants to have their own general liability insurance as well. Here's why.

Avoid Lawsuits Against You 

If someone gets hurt on one of your properties, there's a good chance that they're going to sue everyone to try to figure out who was at-fault and who has the deepest pockets. For example, let’s say you own a large office building and your lease says the primary tenant is responsible for maintaining the public lobby. A visitor who gets hurt in a slip and fall on a wet lobby floor might sue you, the main tenant, the maintenance company, and anyone else they can think of. 

There are a few possible court outcomes. The court might say only the tenant is responsible and you have no liability. The court could also say that you have to pay the visitor — since it was your building — but could then go after your tenant for not maintaining the lobby as agreed. You then may or may not be able to collect from the tenant depending on how a judge reads your lease or if your tenant has any money. Even if you win, you could still be out legal fees.

Protect Your Tenants 

Requiring everyone to have general liability insurance also protects your tenants. For example, one tenant could cause a flood or fire that damages another tenant's business property. The tenant with the damaged property can rest assured knowing that the tenant who caused the damage has general liability insurance that will cover the claim.

Cut Costs 

It is theoretically possible to buy general liability insurance that covers your tenants just as their own policy would. But what you'd really be doing is buying insurance for them. Since you're covering more things, your cost of insurance would increase. You could either lower your profits or build the cost into your lease profits— which would put you at a disadvantage against the other landlords — or have tenants buy their own insurance. As a middle ground, you might consider partnering with a general liability insurance company to offer policies to all of your tenants in exchange for a group discount.