The August earthquake that shook Napa, California and caused upward of a billion dollars in damages should be a reminder for companies to make sure that their leased premises are adequately insured.
Most leases provide that landlords are not responsible for damages to tenants’ business and personal property, fixtures and equipment, except if the leased premises are damaged by the landlord’s negligence. While leases require tenants to obtain certain insurance, it is up to the tenants to review and address with their insurance agents and lawyers the various risks to their business and property, such as earthquakes, floods and other natural disasters.
Many tenants have property and general liability insurance, but those types of insurance will not protect the tenant against its loss of revenue in the event it cannot use its leased space for an extended period of time. Tenants should consider adding business interruption insurance to protect them against an extended interruption in their business. Furthermore, many standard property insurance policies have exclusions from coverage for earthquakes, environmental issues and other damages. Tenants need to carefully consider whether to add additional insurance coverage.