LH-1 Class Code & Lessor's Risk Explained

If you've shopped insurance for a commercial building you lease to tenants, you've probably run into the term LH-1 — and maybe been told your building should be rated at the LH-1 class code. This guide explains what LH-1 means, how it's priced, and why getting the class code right is the foundation of a properly structured Lessor's Risk Only program.

What is the LH-1 class code?

LH-1 is the ISO protection class code for a Lessor's Risk Only building — a commercial property leased to tenants where the building owner's only occupancy is as a landlord. The owner doesn't operate a business on the premises; they simply lease space to tenants who do.

The class code matters because it tells the underwriter exactly what the risk is: a building owner with tenant-caused-loss exposure but no operating business of their own. That's a different risk profile from an owner-occupied commercial property, and it's priced accordingly.

How LH-1 pricing works

LRO under the LH-1 code is rated on a few core factors:

• Building replacement cost — what it would cost to rebuild the structure
• Construction type — frame, joisted-masonry, or fire-resistive, each with different fire exposure
• Protection class — fire department access, hydrant proximity, sprinklers, alarms
• Square footage leased — the scale of the tenant-occupied space
• Tenant mix — the hazard level of the businesses leasing the space
• Location — regional wind, storm, wildfire, and freeze exposure

The interplay of these factors determines whether your building lands in standard markets at good rates or needs a specialty or surplus-lines market.

Why the class code must be right

Getting the class code wrong is expensive in both directions:

• Miscoded as owner-occupied — you can be overcharged, or a tenant-caused claim can be denied because the policy form didn't match how the building is actually used.
• Miscoded as a higher-hazard occupancy — you may pay more than you should because the underwriter assumes an operating business with more exposure than a landlord-only building has.

Real LH-1 coding means the policy form, the pricing, and the coverage all match the reality of a landlord-only commercial building. That's the foundation everything else in the program is built on.

The tenant-mix variable

Within LH-1, the tenant mix is the single biggest pricing variable after the building itself. A multi-tenant office building full of professional services tenants is a very different risk from a flex-space building leased to welders, auto-repair shops, and food-service tenants. Higher-hazard tenant mixes — contractors with hot work, restaurants, manufacturers — push the building into specialty markets that understand and price those exposures.

We know which markets write which tenant mixes and how to present the building so it lands in the right market at the right price.

What LH-1 covers (and doesn't)

A Lessor's Risk Only program at LH-1 covers:

• The building itself against fire, wind, theft, and other covered perils
• Tenant-caused bodily injury and property damage — including fire from tenant operations
• Premises liability for common areas you control
• Defense costs when you're named in a lawsuit

It typically does not, on its own, cover internal mechanical and electrical breakdown (that's equipment breakdown), professional-management mistakes (that's property management E&O), or your employees' injuries (that's workers' comp). A full program layers these on top of LRO.

Beyond LH-1: the full program

LH-1 is the foundation, but most commercial landlords need a coordinated program:

• Lessor's Risk Only (LH-1) — the core
• Commercial property at replacement cost — the building value
• Equipment breakdown — HVAC, elevators, boilers, electrical
• Umbrella / excess liability — limits above the primary program
• Property management E&O — if you self-manage
• Commercial auto and workers' comp — if you have vehicles or employees

We coordinate all of it under one program with one point of contact.

Get the class code right from day one

If you own a commercial building and lease to tenants, your program should start with real LRO at LH-1 — not a generic policy that doesn't match how the building is actually used. Tell us about the property and we'll structure it correctly from the start.

Ready? Get a free quote or call 844-967-5247. Learn more about our Lessor's Risk Only and umbrella / excess liability coverage.