Definitions
Liability means legal responsibility for one’s acts or omissions, typically due to negligence, failure to perform a promised act, or the commission of a crime, for example. Typically, the Landlord wants assurance that s/he will not be held liable for any tenant transgression. Likewise, the Tenant wants to limit his or her exposure and keep the Landlord responsible for losses under certain circumstances.
Appropriate insurance coverage will prevent a significant economic loss for either the Landlord or the Tenant.
“To indemnify” another party is to compensate that party for loss or damage that has already occurred or to guarantee through a contractual agreement to repay another party for loss or damage that occurs in the future. Sometimes a Landlord will require being indemnified by the Tenant. A “hold harmless” provision means that the identified Party (again, generally the Landlord) is not liable for certain damages. Some courts distinguish “indemnification” and “hold harmless,” while others do not.
Casualty insurance refers to a broad category of coverage against loss of property, damage or other liabilities. Depending on how the policy is written, property insurance provides protection against most risks to property such as by fire, flood, earthquake, or lightning.
Purpose
The ownership, leasing, and occupancy of real estate involve several areas of potential risk and loss to the Landlord, Tenant, and third parties as a result of injury to persons or damage to property. The purpose of this section is to articulate the responsibilities of each Party regarding liability and requirements for insurance.
FAQs
An additional insured is a person or organization that receives the benefits of being insured under another person’s or entity’s insurance policy. An additionally insured often gains this status by means of an endorsement added to the policy, which typically identifies the additional party—in this case, probably the landlord—by name.
Landowners often worry about liability and insurance when it comes to leasing farmland. Although a legitimate concern, this should not be a barrier to leasing to a farmer. Established mechanisms exist to protect farm property owners and farmers and help to minimize risk. Depending on the types of activities, equipment, other aspects of the farm business, and whether a lease includes a residence, a farm lease should require particular kinds of insurance for both parties. There are several factors to consider when determining what kinds of insurance to require or expect in a lease. See the fact sheet Insurance and Liability and additional resources below.
For general information on insurance and liability, refer to the resources listed on page 29 of the A Landowner's Guide to Leasing Land for Farming handbook. This detailed guide also has sections that discuss the types of insurance that should be considered, and who usually pays for them.
Example Text
These text examples (in italics) illustrate what you might include in parts of this section. Example text is not intended as “sample” or “model” language, or as “best practice.” You may copy and paste example text into the template, then modify it for your working lease document. Or you can learn from the examples in order to develop your own text.
Text box “Lessee insurance”
- The Lessee will maintain general liability insurance with coverage of $1,000,000 per incident.
- Lessee shall name the Lessor as additional insured.
- Lessee shall provide Lessor with evidence of the above insurance coverages at the commencement of the Lease term and annually thereafter on the renewal date of such policies. The Lessee will provide notification to Lessor of renewal or cancellation.
- Indemnification: Lessee shall defend, indemnify and hold Lessor harmless against all liability and claims of liability for injury or damage to person or property from any cause on or about the Leased Premises. Lessee waives all claims against Lessor for such injury or damage. However, Lessor shall remain liable (and Lessee shall not indemnify and defend Lessor against such liability or waive such claims of liability) for injury or damage due to negligence or willful misconduct of Lessor or his/her agents or employees.
Text box “Lessor insurance”
- Lessor will maintain fire and extended casualty insurance coverage on the premises of not less than $500,000.
- Lessor agrees to maintain fire and extended casualty insurance coverage adequate to replace or repair the dwelling or farm building used by the Lessee that may be destroyed or damaged by any cause covered by the policy.