Lessor's Risk Only (LRO) Insurance
What is Lessor's Risk Insurance?
Lessor's Risk Only insurance is a policy built to shield commercial landlords from tenant lawsuits involving property damage and bodily injury.
LRO policies protect the landlord only. Tenants need their own liability insurance to protect against potential legal and financial consequences arising from their actions or negligence on the leased property.
Most landlords or lessors require their tenants to carry and provide proof of their own general liability and property coverage to help ensure all bases are covered.
What Does an LRO Policy Cover?
LRO policies cover a number of situations in which a tenant may decide to file suit against the landlord:
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Incidents of tripping, slipping, and falling
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Instances of theft or vandalism
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Damage from smoke or fire
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Water damage caused by burst pipes or sewer backup
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Weather-related damage due to elements like wind, hail, or the weight of snow/ice on the roof
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Potential loss of digital information if tenants are connected to the landlord's computer network.
Property insurance is a separate form of coverage that should be purchased alongside the lessor's risk policy to protect the landlord's investment in the building, itself. LRO policies do not cover damage to the building or personal property belonging to the landlord. Similarly, a tenant's personal property is not covered by an LRO policy. The tenant should maintain their own property and liability policies to protect their interest.
It should also be noted that LRO policies do not safeguard against third party bodily injury or property damage claims, only those brought against the landlord by a tenant. Therefore, lessor's risk only policies are not a substitute for general liability. Both policies work hand-in-hand to help protect the policyholder from distinct types of exposures.
Lessor's Risk Only Considerations
It's important to note that specific considerations can vary among insurance providers, and the following are general aspects that may be taken into account by underwriters:
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Property Characteristics:
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The condition and age of the leased property.
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Construction type and materials used.
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Square footage
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Safety protection measures in place (e.g., central station fire alarms, burglar alarms, sprinkler systems, cameras, etc.).
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Location:
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Geographical location and exposure to natural disasters or specific risks.
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Crime rates and overall safety of the area.
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Occupancy Type:
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The type of business or activities conducted in the leased space.
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Compliance with local zoning regulations.
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Tenant Risk Profile:
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The financial stability and track record of tenants.
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Types of operations conducted by tenants and associated risks.
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Number of employees working for the tenant
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Loss History:
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Previous insurance claims and loss history of the property.
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Patterns of past losses, especially recent claims.
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Coverage Limits and Deductibles:
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Adequacy of coverage limits based on the potential liabilities.
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Appropriate deductibles to align with the lessor's risk tolerance.
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Liability Concerns:
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Liability exposures related to the property and its use.
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Adequacy of liability coverage to protect against potential lawsuits.
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Market Conditions:
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General trends and conditions in the insurance market.
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Availability of coverage and pricing considerations.
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Insurance providers will evaluate these factors collectively to determine the level of risk associated with a lessor's risk policy and to establish appropriate coverage terms and premiums.
Book a Free LRO Consultation Call
We offer a complimentary consultation call. This quick yet valuable session is designed to provide you with personalized insurance insights and guidance. During this brief chat, we'll discuss your insurance needs, address any questions or concerns you may have, and explore potential coverage options tailored to your unique circumstances.