Protecting your commercial property is crucial, and that’s where Lessors Risk Only (LRO) insurance and general liability insurance come in. Differentiating between these coverages empowers you to make informed decisions about safeguarding your business.
Delve into the world of LRO insurance in this article, as we unravel how it shields commercial landlords. John Carroll, a commercial lines staff underwriter at Central Insurance, sheds light on why all commercial building owners and landlords should consider this coverage.
Exploring LRO Insurance
LRO insurance is a specialized protection tailored for property owners who lease their buildings to tenants. It merges commercial property and liability coverage, offering a safeguard for landlords renting out office buildings, retail spaces, warehouses, and other commercial properties.
The property coverage aspect shields the building from various risks like fire, vandalism, theft, and certain natural disasters, ensuring landlords can recover from losses and rebuild damaged structures.
On the other hand, the liability segment safeguards landlords from legal responsibilities, such as bearing the medical costs if a tenant or visitor sustains an injury on their property due to negligence. Slip-and-fall incidents often lead to claims against property owners. For example, if a shopping center owner fails to repair a parking lot pothole, they would be held liable if a visitor gets injured. The liability would also extend to injuries caused by negligence in snow and ice removal on walkways.
“Negligence determines liability,” Carroll explains. “Claims related to building or parking lot maintenance typically fall on the property owner. Conversely, if a shop owner leasing the space creates a tripping hazard, like leaving products in a walkway, the liability would likely fall on them.”
Determining LRO Coverage
The amount of LRO insurance coverage required depends largely on the operations of the tenants. Different business types pose varying risks.
For instance, leasing property to a bar carries higher risks compared to renting out office space or a retail store. Restaurants and bars have elevated exposure to fire hazards due to cooking equipment and increased liability risks from customer injuries. As such, property owners letting space to high-risk businesses need more comprehensive LRO coverage to mitigate these risks. Even in less risky scenarios, LRO insurance offers protection against accidents, vandalism, or natural disasters caused by tenant activities.
Fact: National Restaurant Association reports that restaurant fires make up 6% of nonresidential building fires annually and cause over $100 million in property damage.
“We thoroughly assess exposure and building usage when determining the suitability for LRO insurance,” Carroll points out. “An office usually has fewer people coming and going compared to a high-traffic retail shopping center. Additionally, we consider the nature of the business. Industries like fireworks manufacturing or chemical production are typically too hazardous for LRO coverage.”
Ultimately, the risk level and recommended LRO insurance coverage depend on the renter operations. Property owners should evaluate and comprehend their tenants’ businesses to effectively safeguard their properties.
The Central Edge
LRO coverage is crucial for every commercial landlord. It’s vital to review and update your LRO policies as tenant dynamics change. Central’s dedicated team of commercial insurance specialists can evaluate your business property and risks to tailor the ideal level of LRO insurance for you. Besides ensuring adequate coverage, our experienced Loss Control team can offer advice on risk reduction, prevention of accidents, and protecting your investment from costly claims.
Ready to take the first step? Find an agent today to discover more about Central’s LRO and other commercial property coverages.
