Read the fine print or it could cost you.

By: Deborah Gibson, BA, CIP

The rain and ice storms of 2013 were not only a test of endurance and survival; they created hardship between landlords and tenants when it came to determining whose insurance paid for any damage. While the typical assumption is that the tenant holds insurance for their contents and the landlord holds insurance for the building, it all boils down to an issue of defining what constitutes the building. When tenants’ improvements are involved and “attached” to the building or when “items” previously considered “structural” in nature, like a “roof” do not include the tar and gravel on top, conflict can arise.

Another changing area affects condominiums and specifically, the differentiation of common elements from the individual units. While common elements are typically insured by a condominium corporation’s policy, there is a growing trend for newer condominiums to migrate more elements of the physical structure into an individual’s unit owners’ responsibility to insure. This may affect you if your centre is located in leased premises in a condominium complex.

What does this all mean? Now more than ever, you need to be sure the values you insure as a tenant or condominium owner properly reflect the true replacement cost of not only the tenant’s contents, but also the improvements and potentially any other items of the building that the wording in the lease or condo documents assign to the tenant. Examples of items becoming a tenant’s responsibility are:
• windows
• concrete block or masonry portions of load bearing walls
• foundations or footings
• floor or roof “assemblies”
• exterior or interior walls and doors.

On the flip side, claim weary insurers paying the multitude of ice dam and flood water damages have taken a microscope to these wordings to ensure the responsible party’s insurer pays. Perhaps you are considering a lease where the prior tenant made all the improvements. Make sure you are aware of what these values are. They need to be insured in addition to your contents and in addition to any price you paid to the prior business.

The best advice is to have your insurance broker review the wordings of your lease to make sure your obligations are clear and to ensure the policy responds. The fine print could mean the difference between a claim paid or a claim strained. When it comes to leases or condominium corporations, the last thing you want is a problematic relationship with the owner of the roof over your head!