Insurance Lawyers who who handle claims made through Renters Insurance policies should know there is a new kind of renters insurance coming into the marker. Traditional Renters Insurance covers break-ins, thefts, floods, and various other types of claims to the personal property of a renter. The new kind of renters policy is coverage for the rent.
The National Law Review published an article in May 2020, that is titled, “Rent Guarantee Insurance — A Solution For Landlors?”. The article tells how the Chinese virus pandemic is having a profound impact on both insurance companies and their insureds with a multitude of claims having already been made and denied. Parties that have been especially hard hit financially by the pandemic are the owners of retail shopping complexes that have multiple tenants, many of which have had to close because they are “non-essential” businesses under government emergency orders. This has resulted in a loss of rental income to these owners as landlords. While these landlords may have business interruption insurance as part of the commercial property, the pandemic is proving that whether business interruption insurance provides coverage is uncertain. This uncertainty may ultimately only be resolved by court rulings made in connection with litigation proceedings. Accordingly, given the fact that events such as the Chinese virus pandemic may occur again, commercial landlords may wish to consider rent guarantee insurance for protection.
Leases often provide that if the leased premises are damaged by a fire or other casualty event, the tenant’s obligation to pay rent will abate during the period that the leased premises are repaired and restored. In this situation, a landlord desires to have a source of funds to replace the rent payments that it does not receive from a tenant during the period the rent abates. Rent loss insurance can be a means to cover the risk associated with the lost rent. As with business interruption insurance, however, there typically must be physical damage, e.g., fire to the landlord’s property. Further, rent loss insurance may exclude coverage for loss of rent due to certain types of damages. For example, some rent loss insurance policies do not cover water damage that creates mold because of a water leak that the landlord failed to repair. Of particular significance is the fact that that rent loss insurance pays the fair market rental value of the leased premises, which may be less than the amount of rent the tenant is obligated to pay under the lease.