Can a Tenant be Required to Obtain Insurance Against the Landlord’s Negligence?

Sure, why not? A recent case, Clarendon American Insurance Company v. Prime Group Realty Services, Inc., Nos. 1 08 0791 and 1 08 1985 (Ill. App. Ct., 1st Dist.,March 26, 2009), specifically statest that if the landlord and tenant enter into a lease requiring the tenant to name the landlord as an additional insured, covering all losses, whether or not they occur as a result of the landlord’s negligence, then the tenant must comply with the insurance provisions of the lease, or be in violation of the lease.

In the Clarendon case, the tenant argued that it was not fair for the tenant to have to procure and maintain insurance for the landlord’s negligent acts. The court disagreed — the terms of the lease were explicitly agreed to. Moreover, the court distinguished between insurance and indemnification. It is against public policy for a party to be indemnified for its own negligence. It is not, however, against public policy to have another party insure the negligent party against its own negligence.

When entering into any commercial lease, the insurance and indemnification provisions should be reviewed carefully and agreed to by all parties to prevent any misunderstandings, and hopefully, any litigation down the line!