Real Estate Tip of the Week: Co-insure, but don't co-exist

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Real Estate Tip of the Week: Co-insure, but don't co-exist

Published 7 January 2019

An increasing number of tenants (and their advisors) are alive to the fact that merely noting their interest on their landlord’s building insurance policy does not give them the protection they are seeking to obtain – because it creates no contractual relationship between the tenant and the insurance provider.

Where a tenant occupies a substantial part of a building, insured by the landlord, they may well push to become “co-insured” on that policy to establish that direct contractual relationship.

There are some key points to be alert to, if this is agreed:

Ensure that the policy expresses that the parties are insured on a “composite” basis. This will mean that a breach by one party does not prejudice or affect the insurance rights or entitlement of the other.

Demand that all communication with the insurance provider or broker is undertaken directly by the tenant in relation to the tenant’s own insurance requirements only. The landlord will want to avoid any suggestion that it is liable to extract all relevant information required by the insurance provider from the tenant, or be held responsible where some of that information is absent or false, thereby invalidating the policy.

The tenant is likely to be entitled to make direct representations to the insurance provider, in the event of damage, in relation to how reinstatement is undertaken. To avoid a conflict, where a tenant is co-insured, the lease should state that the landlord has absolute control over the reinstatement negotiations with the insurance provider.

Finally, although the risk profile should not change as a result of a co-insured policy, there may be a small uplift in cost due to the increased management of more than one insured party. Ensuring that there is transparency in those costs, and how they are proportionately recovered from multiple tenants with varying insurance interests, will be important and subject to scrutiny.

Authors

Nicola Fairbairn

Nicola Fairbairn

Newcastle

+44 (0)191 404 4019

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