Form IL 00 02: Additional Insured - Manager Or Lessor Of Premises
The IL 00 02 (Additional Insured - Manager Or Lessor Of Premises) is an endorsement used with various commercial liability policies, such as the Commercial General Liability (CGL) coverage part (e.g., CG 00 01) or a Businessowners Policy (BOP) (e.g., BP 00 03). Its primary function is to extend liability coverage to the manager or lessor (landlord) of a premises that the named insured leases or occupies. This endorsement is crucial in situations where the named insured (the tenant) is contractually obligated to provide insurance coverage for their landlord for liability arising out of the tenant's use of the leased premises.
The coverage granted to the additional insured (manager or lessor) is specifically tied to liability for "bodily injury," "property damage," or "personal and advertising injury" caused, in whole or in part, by the named insured (the tenant) or those acting on the tenant's behalf. This means the landlord is protected against claims stemming from the tenant's operations or occupancy of the specified premises. The coverage applies only to the part of the premises leased to the named insured and shown in the endorsement's schedule.
Classes of Business It Applies To
This endorsement is widely used across numerous industries and business types whenever a commercial tenant leases space. It's not specific to a particular class of business but rather to the landlord-tenant relationship. Real-world examples include:
- A retail store leasing space in a shopping mall. The mall owner (lessor) would likely require the store owner (named insured) to add them as an additional insured using a form like IL 00 02.
- An accounting firm renting an office suite in a commercial building. The building owner (lessor) would be the additional insured.
- A restaurant operating in a leased storefront. The property owner (lessor) would seek this additional insured status.
- A manufacturing company leasing a warehouse. The warehouse owner (lessor) would be added to the manufacturer's CGL policy.
- A doctor's office leasing space in a medical arts building. The building manager or owner (lessor) would be the additional insured.
Essentially, any business that leases its operational premises can expect to encounter the need for this endorsement as part of its lease agreement requirements.
Special Considerations
There are several important considerations and limitations associated with the IL 00 02 endorsement:
- Scope of Coverage: The coverage for the additional insured is limited to liability arising from the named insured's acts or omissions, or those acting on their behalf, in connection with the ownership, maintenance, or use of the leased premises. It does not typically cover the additional insured's sole negligence.
- Contractual Requirement: Often, the requirement for this endorsement stems from a lease agreement. The insurance provided to the additional insured will not be broader than what is required by the contract or agreement. Similarly, if the contract specifies a certain limit of insurance, the coverage for the additional insured may be restricted to that amount, even if the policy's overall limits are higher.
- Exclusions: The endorsement contains specific exclusions. For instance, coverage for the additional insured typically ceases once the named insured is no longer a tenant in the premises. Furthermore, it generally excludes coverage for structural alterations, new construction, or demolition operations performed by or on behalf of the additional insured (the manager or lessor).
- "To the Extent Permitted by Law": The endorsement often includes language stating that the insurance afforded to the additional insured only applies to the extent permitted by law. This acknowledges that some jurisdictions may have anti-indemnity statutes or other laws affecting the enforceability of such provisions.
- Designation of Premises: The specific premises leased to the named insured must be clearly designated in the endorsement's schedule. Coverage for the additional insured applies only to that designated part of the premises.
Real-world example: If a tenant (named insured) causes a fire due to negligence within their leased unit, injuring a visitor, the IL 00 02 endorsement would typically provide coverage to the landlord (additional insured) if they are sued by the injured visitor. However, if the landlord undertakes a major renovation of the building's lobby (not part of the tenant's leased premises) and someone is injured due to the landlord's own construction activities, this endorsement on the tenant's policy would likely not provide coverage to the landlord for that incident.
Key Information for Agents and Underwriters
Agents and underwriters should pay close attention to the following when dealing with the IL 00 02 endorsement:
- Lease Agreement Review: It is crucial to review the lease agreement to understand the specific insurance requirements imposed on the tenant. This helps ensure the endorsement, and the policy as a whole, meets the contractual obligations. The coverage provided to the additional insured will not be broader than that required by the contract.
- Risk Assessment: While the endorsement primarily covers the landlord for the tenant's actions, the nature of the tenant's operations can still impact the landlord's risk exposure. Underwriters should consider the type of business the tenant operates and the potential hazards associated with it.
- Pricing: An additional premium may be charged for adding an additional insured, although sometimes it might be included. This depends on the insurer's rating methodology and the perceived increase in risk.
- Coverage Gaps: Agents should explain to the named insured (tenant) that this endorsement protects the landlord, not the tenant, from the landlord's own negligence. The landlord should still carry their own liability insurance. It's also important to note the exclusions, such as those for structural alterations by the landlord or incidents occurring after the tenant vacates the premises.
- Proper Naming: Ensure the person(s) or organization(s) to be added as an additional insured are correctly and fully named in the schedule as they appear in the lease agreement. Ambiguity can lead to coverage disputes.
- Underwriting Guidelines: Underwriters will assess the relationship between the named insured and the proposed additional insured. They will also consider the specific premises involved and any unique hazards. The overall quality and loss history of the named insured remain paramount.
- Certificate of Insurance (COI): While a COI is often requested as proof of additional insured status, the COI itself does not grant coverage. The endorsement (IL 00 02 or a similar form) must be attached to the policy for coverage to apply. Agents should ensure the COI accurately reflects the coverage provided by the endorsement.
Understanding the nuances of the IL 00 02 ensures that both the tenant and the landlord have appropriate protection as intended by their contractual agreements and the insurance policy.