Lessor's Risk for Non-Owner

Aug 18, 2016

  1. dkunigk
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    dkunigk New Member

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    I have insured a business that leases a 5,000 - 10,000 sqf commercial space and builds out mini-salons for hairstylists, beauticians, etc. My client doesn't provide any services directly. I was able to write it through a captive company I used to be with but now as an independent, I am having a hard time finding a carrier that can do it. The main reason is that lessor's risks are meant for building owner but my client himself is a tenant. Liberty Mutual couldn't do it because each sub-lessee can access the main suite 24/7. Travelers, Hartford, USLI, CNA, Liberty Mutual have all turned it down. They have 3 locations with a total premium of about $9,000.
    Can anyone think of a carrier (admitted or non-admitted) that would be willing to take a look at this?
     
    dkunigk, Aug 18, 2016
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  2. nyc2phi
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    nyc2phi Guru

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    Confused...so this guy leases space from the owner of the building, renovated them, and subleases them out?
     
    nyc2phi, Aug 18, 2016
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  3. Comm_Ins
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    Comm_Ins New Member

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    Sounds more like your client should be classified as a Property Manager, USLI will write it, they will have some contingencies, each sub tenant will be required to have their own GL.
     
    Comm_Ins, Aug 18, 2016
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  4. tpowell138
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    tpowell138 Expert

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    So basically your just covering the insured's TI's and maybe some BPP? Is your insured legally liable for a slip and fall..? If he/she is on the contract for the lease he would be drug into a case no doubt.

    Unless your insured signed a Triple net lease and is responsible for insuring the building... Even then usually the building owner secures the LRO building insurance and gives the bill to the tenant. But Not always..

    Sounds like your insured is possibly running a franchise, and sub leasing to the franchise owners of each location.

    Can you clarify exactly what type of property damage your after for your insured who holds the lease contract.
     
  5. dkunigk
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    dkunigk New Member

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    My client is not responsible for the building. But he wants his $1M investment in TIs and BPP be insured (also a requirement due to financing). Yes, he is responsible for slips/falls and is required by the building owner to carry BPP, GL, and BI. Each small business owner (hair stylist, manicurist, etc.) that sub-leases a small suite is completely independent and required to carry their own GL.

    I reached out to some companies to see if changing the underwriting from lessor's risk to property management makes a difference but so far it doesn't seem to.
     
    dkunigk, Aug 25, 2016
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  6. tpowell138
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    tpowell138 Expert

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    I don't see the separation between lessor risk and a hair salon.
    I would write a BOP with the TI RC limits you need and buy standard $1M/$2M liability limits for premises and completed ops.
    The hairstylist are nothing more then a independent contractor.
    Your insured holds the contract.
     
  7. dkunigk
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    dkunigk New Member

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    I tried that approach before as well and it was turned down because the insured does not perform any beautician work and solely operates as a lessor.
     
    dkunigk, Aug 29, 2016
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  8. tpowell138
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    tpowell138 Expert

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    I don't know what we are missing our how we are miss understanding each other... But I know we will determine the missing peace/confusion.

    All day long I can write a beauty salon with Liberty,Travelers or Hartford.
    John Jones rents a 5,000 sqft suite or building. John signs the lease under his LLC, Simple Scissors Salon.
    I would write John a BOP or Commercial Package to insure his liability, BPP and TI limits. John does not have any employees. He has sub contracted workers (beauticians) pay both rent to him to use his facility.
    This is how you need to describe the risk to the carrier.

    John Jones rents this building from Alex Smith who owns the building and pays for a Lessor Risk policy. If John Jones rents the entire building not just a unit he may have a triple net rent where he is responsible to pay Alex Smith the expenses of the Lessor Risk policy. But the building insurance is Alex Smith responsibility.

    Hope this helps
     
  9. djs
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    djs Super Moderator Moderator

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    Exactly what Tpowell said! Most hair salons, except for the franchise ones, simply are an owner who rents 'chairs' to the stylists as independent contractors.

    You are describing a normal mode of business in the hair/beauty industry.

    I think you are describing a risk to the underwriter in a manner that is causing them some concern, when in fact, it sounds like a normal thing to me.

    Dan
     
    djs, Aug 30, 2016
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