Tenant Self-Insurance Does Not Protect Landlords

In our practice, we have had numerous opportunities to represent property owners/ landlords in lease negotiations with large national retail tenants. Very often, these national companies propose lease provisions which seemingly provide protection to the landlord but, in fact, offer little substance. “Self-insurance” is when the large tenant does not purchase insurance from a carrier but rather “insures itself” and the landlord is supposed to be protected by the nancial strength of the tenant. Many national retail chains, in particular, seek to use this device to indemnify and hold harmless a landlord for liability for a whole host of situations including personal injury claims, such as slip and falls.

Very often, they self-insure and purchase only high deductible policies, naming the landlord as an additional insured. The landlord then is protected because they have a large nationally known chain paying rent every month and insurance is in place. They have the security of knowing that if there is a claim below the deductible amount, the big national chain will handle the matter and/or foot the litigation bill.

“Self-insurance” is when the large tenant does not purchase insurance from a carrier but rather “insures itself” and the landlord is supposed to be protected by the nancial strength of the tenant.

But what happens when the “great tenant” files for bankruptcy? The indemni cation and hold harmless is not worth the paper it is written on and the only policy in place has a high deductible. In this case, frequently, the landlord must go out of pocket for attorneys’ fees and all costs. Property owners/landlords are left carrying the litigation ball, with suits that they have no knowledge about. Self- insurance provisions in effect provide little or no protection.

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