Lessor's risk only (LRO) coverage

You can hear this being referred to as landlord or LRO insurance.  This insurance protects landlords from claims by tenants for property damage or bodily injury, such as fire or water damage, or slip-and-fall accidents.

This coverage is designed to cover commercial property risks such as:

• office space
• apartment buildings
• retail buildings
• warehouses
• and many more

Lessor’s risk only insurance covers several risks from property damage or bodily injury that comes from a property leased to a client. These include losses such as:

• Slip-and-fall injuries
• Weather damage
• Vandalism
• Fire
• Water-related damage (burst pipes / backups)
• Auto accidents at the property
• Theft

Lessor’s risk only and general liability insurance are similar small business coverages that protect you when third parties claim you damaged their property or caused them bodily injury.

The main difference is that landlord insurance applies exclusively to losses resulting from your tenant’s use of your property. For example, if one of your tenants slipped and fell on a stairway in your leased building and blames your failure to provide adequate lighting, then your lessor’s risk only policy would respond to the incident. It would provide you with an attorney and pay for your legal expenses, up to the policy limits you purchased.

The premises liability portion of your general liability coverage applies to lawsuits that other third parties (not your tenant) bring against you for property damage or injuries suffered on your property. If a delivery person fell on the same stairs as the tenant, your general liability policy would respond.

This underscores the importance of maintaining both lessor’s risk only and general liability insurance on all properties you lease.

Lessor’s risk only shields you against tenant claims of property damage or bodily injury due to your wrongful act. It has nothing to do with protecting your own commercial property against various types of damage. For that, you need commercial property insurance.

Lessor’s risk only insurance does not cover a tenant’s personal property. Tenants would normally seek coverage from their personal renter’s or homeowner’s policy.

Underwriting requirements vary depending on the insurer. In general, however, an insurance company will look for your building to be:

• Fully or largely occupied
• Free of electrical hazards
• Protected by smoke detectors, sprinklers, and fire extinguishers
• Well maintained