Does Your Building Need LRO If Tenants Carry Their Own GL?

"My tenants all carry their own general liability and name me additional insured. Do I really need my own lessor's risk policy?" We hear this question constantly from commercial property owners. The short answer is yes, absolutely — and the reasoning matters a lot for how you structure your lease requirements and your own coverage.

Your tenant's policy covers the tenant, not your building

Your tenant's general liability (GL) policy covers the tenant's liability and the tenant's own property. It does not cover the building you own. If a tenant's cooking operation starts a grease fire that damages the suite next door, the tenant's GL may respond for the tenant's negligence — but the physical damage to your building falls on your own property coverage, not theirs.

If the tenant is uninsured, underinsured, or skips out after the loss, you're left holding the damage with no one to recover from. Lessor's Risk Only (LRO / LH-1) protects the building owner regardless of what the tenant carries.

The additional-insured myth

Requiring tenants to name you additional insured is the right move — but it's not a substitute for your own coverage. Additional-insured status means your tenant's GL extends to you for claims arising from their operations. That's valuable. But:

• It only applies while the tenant's policy is in force — and tenants let policies lapse more often than you'd think.
• It responds to the tenant's operations, not to building conditions or common areas you're responsible for.
• It does not cover the physical building itself against fire, wind, or other property perils.

You need both: a robust LRO program of your own and lease requirements that every tenant carry GL and name you additional insured.

What your own LRO covers that the tenant's policy won't

A properly structured Lessor's Risk Only program covers what the tenant's policy can't:

• The building itself — structure, roof, fixed systems against fire, wind, theft, and other covered perils
• Tenant-caused fire and property damage to the building and other tenants' space
• Premises liability for common areas — parking lots, hallways, entrances you control
• Equipment breakdown for HVAC, elevators, boilers, and electrical panels
• Defense costs when you're named in a lawsuit as the building owner

The defining coverage is the tenant-caused-loss piece — the exact scenario a generic policy or a tenant's GL alone won't fully handle.

How to structure your lease requirements

A well-drafted commercial lease protects both sides. We recommend every tenant be required to:

• Carry general liability at minimum limits (typically $1M per occurrence / $2M aggregate)
• Name the building owner as additional insured on a primary, non-contributory basis
• Carry property coverage for their own contents and tenant improvements
• Provide an annual certificate of insurance with renewal, with notice to the owner if the policy lapses

We provide a sample lease-insurance clause and help you set up certificate tracking so tenant coverage sits neatly beneath your own program.

The bottom line

A tenant's insurance and your own Lessor's Risk Only policy do different jobs. The tenant's policy covers the tenant; your LRO covers the building and you as the owner. You need both — and a lease that requires the tenant to play their part.

Ready to get this right? Get a free quote or call 844-967-5247. Learn more about Lessor's Risk Only and premises general liability.