Contract Farming
Cameron Rudolph| January 29, 2014 3 Property & Casualty Continuing Education Credits
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Contracts: Tangled Relationships
Presented By:Cameron Rudolph
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What Is A Contract?
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Contract Defined
• A legally binding agreement involving two or more people or businesses that sets forth what the parties will or will not do. – Can be oral (with some exceptions) or
written
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Contract Elements
• Competent parties—usually adults of sound mind or business entities
• Mutual agreement to provide each other some benefit
• A legal purpose• Consideration
– Some form of service, property, money involved
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Contracts And Risk Management
Risk Transfer By Contract is Significant Portion of ERM
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Risk Management Defined
• “Risk Management is the practice of protecting an organization from financial harm by identifying, analyzing, and controlling risk at the lowest possible cost.”
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Risk Transfer
• Designed to shift business risk to other finance mechanisms
• Risk transfer typically takes place in a business contract
• Contracts may INCREASE risk for either party (or both) if not structured properly
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Risk Finance
Transfer
Contractual
IndemnityAgreement
InsuredsProgram
AdditionalInsured
BusinessPartnersProgram
Retain
Insureds Financial
Resources
FundedUnfunded
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Ag Contracts
Typically Revolve Around Supply Chain Management
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Examples of Contracts
• Crops, livestock– Purchase agreements
• Warehousing• Processing• Transportation• Labor• Third Party Logistics (3PL)
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3PL
Crop
3PL Logistic
Trucker
Buyer
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Major Areas of Contract Concerns
• Property– Party responsible for loss of property– Types of losses to property– Valuation of property
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Major Areas of Contract Concerns
• Terms of indemnification for third party injury or damage– Arising out of property– Arising out of operations– Arising out of transport
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Major Areas of Contract Concerns
• Pollution– On site– In transit– Loading / unloading
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Indemnification Agreements
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Indemnification
• The most common form of risk transfer
• One party agrees to assume another’s liability
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Indemnification
• This shifts normal liability and potential risks from one contractual party to another– Implied indemnity, common law – Express indemnity, written in a contract
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Indemnification
• Indemnification takes many different forms:– Limited– Intermediate– Broad
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Indemnification Concerns
• Negotiation of terms based on many factors:– Size of insured– Supply and demand– Sophistication of insured– Involvement of knowledgeable
attorneys and insurance personnel
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Indemnification Concerns
• Relying on indemnitor’s contractual obligations involve:– Lack of control over other party– Type of insurance and insurance
company used– Compliance with business contract
terms
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Contract Indemnification Issues
• Wording of indemnity agreement– “Clear and unequivocal” wording– Both contract parties understanding of
the intent– Compliance with law– Attorneys fees, court costs, other
costs and damages to a third party
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Contract Indemnification Issues
• Verify indemnitor’s ability to comply with indemnity provisions– Insurance programs in effect during
term of contract– Insurance programs to remain in effect
after the term of contract
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Contract Indemnification Issues
• If required to add as additional insured, no language that could extend coverage beyond the indemnity agreement
• Verify that the insurance policies respond to any specifically required wording and not just typed on a certificate of insurance
Contract Indemnification Issues
• Defense should be addressed specifically in the contract
• The contract should specify insurance to contain contractual liability protection.
• Defense costs for an indemnitee can reduce the indemnitor’s limit of insurance 24
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Warehousing
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Property Exposures
• Business Contract• Look to the contract to answer many
questions.– Property owner– Responsibility for loss or damage
• Types of losses• Valuation of property• Geographic area of responsibility
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WarehousingProperty Of Others
• Insured takes possession, but does not take title
• Bailment terms are critical– Description of goods– Valuation of goods– Must specify inventory handling
procedures– Must define “delivery”
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Warehouseman’s Legal Liability
• Where does the obligation lie?– Many court decisions have been
rendered as a result of this question between owner and warehouseman.
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Warehouseman’s Legal Liability
• The standard of care is imposed upon a warehouseman by Section 7-204 of the Uniform Commercial Code– Most contracts follow this duty of care
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UCC § 7-204. Duty of Care; Contractual Limitation of
Warehouseman's Liability(1) A warehouseman is liable for damages
for loss of or injury to the goods caused by his failure to exercise such care in regard to them as a reasonably careful man would exercise under like circumstances but unless otherwise agreed he is not liable for damages which could not have been avoided by the exercise of such care.
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UCC § 7-204. Duty of Care; Contractual Limitation of
Warehouseman's Liability(2) Damages may be limited by a term in the warehouse receipt or storage agreement limiting the amount of liability in case of loss or damage, and setting forth a specific liability per article or item, or value per unit of weight, beyond which the warehouseman shall not be liable;
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UCC § 7-204. Duty of Care; Contractual Limitation of
Warehouseman's Liabilityprovided, however, that such liability may on written request of the bailor at the time of signing such storage agreement or within a reasonable time after receipt of the warehouse receipt be increased on part or all of the goods thereunder, in which event increased rates may be charged based on such increased valuation,
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UCC § 7-204. Duty of Care; Contractual Limitation of
Warehouseman's Liabilitybut that no such increase shall be permitted contrary to a lawful limitation of liability contained in the warehouseman's tariff, if any. No such limitation is effective with respect to the warehouseman's liability for conversion to his own use.
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Transporting Products
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Transportation Contract Issues
• Storage, Shipping & Freight Forwarders– Determine F.O.B. point
• Consolidation and Shipping International Freight Forwarders– Determine if C.I.F. is required and if so,
by whom
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Shipping Parties
• F.O.B. means Free On Board originally derived from Ocean Marine Cargo definitions
• When goods are shipped F.O.B. to the shipper's location the shipper has title of the goods until they are taken to the carrier for delivery
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Shipping Parties
• The consignee become the owner as soon as the goods are in the carriers hands
• When goods or merchandise are transported there are usually three parties involved
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Shipping Parties
• The Shipper– The company sending the goods
• The Carrier– The company transporting the goods.
• The Consignee– The company receiving the goods
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Shipping Parties
• The owner of the property may be either the shipper or the consignee depending on when and where the loss occurs and on what the terms of the sales contract between the shipper and the consignee are.
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Shipping Parties
• In the care of a private carrier, the owner of the goods would be the shipper/carrier.
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Shipping Parties
• A shipping contract may also be written F.O.B.--Consignee's Location. – In this case the shipper is the effective
owner of the goods until the carrier delivers the goods.
– In the event of loss, the shipper would suffer the loss of goods damaged in transit.
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Shipping Parties
• The degree of responsibility the carrier bears for loss to property in transit depends largely on the type of carrier doing the transport.
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Surface Carriers
• Federal laws recognize three different kinds of surface carriers: common, contract and private
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Common Carriers
• Hauls the goods of the general public for a fee
• Generally has limitations on obligations to customer
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Contract Carriers
• Hauls goods on specific contracts negotiated with a select group of customers to haul their particular goods
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Contract Carriers
• The contract between shipper and carrier in such cases determines the carrier's liability, which may be reduced to that of the ordinary bailee
• This situation imposes a high degree of responsibility on the shipper to carefully evaluate the terms of the contract
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Private Carriers
• Private carriers carry goods they own on their own trucks
• A private carrier that transports a shipment of its own goods somewhere and then hauls someone else's goods on the way back becomes a Contract Carrier on the return.
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Private Carriers
• If that situation applies, the Motor Truck Cargo insurance must cover both owned property as well as the firm's legal liability for the cargo contracted to carry
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Waiver Of Shipper's Default
• Accepting for shipment binds the carrier to deliver in same condition as received.
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Waiver Of Shipper's Default
• Knowledge of following conditions at time of acceptance waives the shipper’s default and imposes legal liability upon carrier.– Inadequately packed goods – special
handling needed.– Improperly marked.– Fragile and easily injured by contact
with other freight.
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Inland Marine Coverage Issues
• Legal Liability Forms– Remember the issues with Bailment
• Consequential loss or damage– Spoilage may need to be endorsed
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Inland Marine Coverage Issues
• Typically ACV– Check contract obligations
• Request RCV or Selling Price• Transportation Business Interruption
– Difficult coverage to find– Expensive– Selling price will help
Farm Labor Contractors
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Farm Labor Contracting
• 1/5 of workers in agriculture across US– 1/3 of workers in California
• Regulations have grown as this business practice has increased
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Farm Labor Contracting
• Regulated by both state and Federal Law– US Department of Labor – Federal
Code of Regulations Title 29, Chapter 5– Most states require state licensing and
all require conformity with the Federal guidelines
• Grower must verify current license55
Farm Labor Contracting
• FLCs must comply with all laws governing employees
• The grower must also comply with all laws governing employees
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Farm Labor Contracting
• Should the FLC fail – will the grower ultimately be responsible for– OTJ injuries– OSHA compliance– Farm Migrant Worker– Unpaid wages– Unpaid taxes
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Employee
Farm Labor Contractor
Direct Employer Responsibility
FarmerWork Site
Responsibility
State Law
• Definitions of PEO, Farm Labor Contractor vary by state
• Requirements to provide WC insurance vary by state
• Co-employer status fairly consistent
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Borrowed Servant Doctrine
• Three criteria:– Express or implied contract of hire
between employer (PEO) and special employer (client)
– Employee engaged primarily in work for the special employer
– Special employer controls work details• This can be modified by statutory law or
common law decisions and will vary state to state
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Advantages To The Grower
• Gains access to workers in a competitive labor environment
• FLCs can provide loss control services / legal services
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Advantages To The Grower
• Grower pays on a fee basis for all services selected.– This arrangement can also reduce
workers compensation insurance costs (legitimately – not by fraudulent experience modification reductions).
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Disadvantages To The Grower
• The grower loses control over required employee-related functions– Filing of proper documents, such as
documentation status, withholding of taxes
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Disadvantages To The Grower
– Transmission of documents and money to proper governmental agencies
– Can be held to pay twice (once to FLC – again to federal/state agencies or the employee)
• Employees may not like the FLC and leave FLC / Grower– Less loyalty to FLC is being
demonstrated every year
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Disadvantages To The Grower
• Has contractually limited right to approve new employees prior to use
• Third party exposure that may not be responded to properly under contract by FLC
Conclusion
• While contracts are a common, necessary and valuable tool in business, contracts must be reviewed for proper insurance placement
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Conclusion
• Many insurance buyers do not understand that their contractual business relationships create insurance gaps
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Conclusion
• Inform the insurance buyer and work with them and their attorneys to properly identify risk and provide a properly designed insurance program to help protect their assets
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FLC Contract Review
Reference Section
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FLC Review Checklist
• Specify which party (or both) has responsibility for assigning job duties and supervision
• If using specialized workers, severance terms and conditions should be agreed upon and set forth
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FLC Review Checklist
• Collection and payment of withholding taxes and benefits
• Compliance with labor laws, including unemployment
• Record Keeping
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FLC Review Checklist
• Compliance with licensing, permit, health and safety laws, wage and hour laws, denial of due process
• Both parties clarify as to intent of status of workers under:– State of hire jurisdiction– State of work and – State of injury jurisdiction
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FLC Review Checklist
• If using temporary workers, clear termination date with provision to extend
• Confidentiality issues and intellectual property (trade secrets, etc.)– Workers with access made a party to the
confidentiality agreement (should be separate)• Intellectual property theft exposure -
difficult and expensive coverage to find
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FLC Review Checklist
• Employment practices issues, indemnity agreement specific as to acts involving both contract parties, vendors, customersand other parties as respects user of labor
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FLC Review Checklist
• Clarify fidelity/bonding arrangements• Party(s) providing:
– Employee benefits– Worker’s compensation– Employment practices liability– and other party’s status on those
policies
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FLC Review Checklist
• Labor lease contract needs to clarify indemnification
• Indemnification provisions for sole negligence of either party
• Identify which party has responsibility for compliance with OSHA requirements
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FLC Review Checklist
• Approval rights of:– Self-insurance program by either party
(in accordance with state law)– Large Deductible plan– RPG or RRG for any coverage line
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FLC Review Checklist
• What are the written provisions for:– Copies of policies– Certificates of Insurance– Additional insured status– Notification of cancellation/non-renewal– Notification requirements in the event of
loss
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FLC Review Checklist
• Warranties and indemnification provisions as to:– Reporting of payroll– Cobra compliance– ERISA compliance– Records, forms, handbooks for workplace
safety, training– EEOC guidelines, state labor law compliance, – Tax withholding and payment to appropriate
governmental agency
1/8/2014
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Custom Farming v. Farm ManagementCameron Rudolph
THE ISSUES
• Economic pressure creates need for additional income and better, more profitable use of land
• Important to make a distinction between Custom Farming and Farm Management
• Legal relationships and insurance implications are different
CUSTOM FARMING
• History• Special expertise (examples: planting, cultivating,
harvesting, breeding, feeding, etc.)• Available labor and specialized equipment• Custom farmer farms his/her own land as well• Landowner maintains principal control of the land and
methods of production
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CUSTOM FARMING
• Landowner pays all costs of production, aside from the fee paid to the custom farmer
• Examples: seed, chemicals, materials used in planting, growing and harvesting
• Landowner receives the proceeds from the sale of the crop and any insurance payments or payment from government programs
• Custom farmer receives a flat fee or other negotiated amount
FARM MANAGEMENT
• Contrasted with Custom Farming• Farm Manager has a substantial agricultural
background and provides a vast array of services• Examples: what to plant, when to plant, how to
plant, what types of chemicals to apply, fertilization techniques, etc.
• Provides services to others, but does not actively farm himself/herself
FARM MANAGEMENT
• Involved in all aspects of farm operations• Compensated with the actual receipts derived from
farm operations• Landowner receives a percentage of the receipts or
other negotiated amount• Some are paid a salary and bonus based on
production• Landowners does not make material decisions
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WHY LANDOWNERS HIRE FARM MANAGERS
• Owner lacks the interest in or knowledge of farm operations
• Owner wishes to retire from farming, but keep the land
• Owner does not reside on the farm property• Owner is engaged in another profession• Owner is seeking increased profitability from farm
operations• Owner does not wish to have tenant farmers or
lease the land to others
FARM MANAGEMENT
• Sometimes short-term or limited basis• Farm Manager is paid a consulting fee• Example: farmer is seeking increased yield and hires
a consultant with special expertise in that crop, but only for the current growing season
• Owner retains decision-making• The service is advice, not farm operations
FARM MANAGEMENT AS A PROFESSION
• American Society of Farm Managers and Rural Appraisers (ASFMRA)
• Accredited Farm Manager (AFM) designation• Accredited Agricultural Consultant (AAC) designation
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VARIATIONS IF FARMING AGREEMENTS
• Landowner and Contractor must create an agreement for services
• Agreement will outline the insurance and other risk management issues of each party
• Contract will specify if it’s for farm management or custom farming
COMMON AGREEMENTS
• Custom Farming Agreement– Sets forth the specific operations to be performed– Includes type of services, dates of service, terms of
payment, responsibilities of each party• Farm Management Agreement
– Services to be performed, including purchase of inputs, labor, record keeping, marketing and sale of crop or livestock, maintenance of equipment, etc.
– Creates additional legal duties since Farm Manager is agent for the landowner and has a professional duty
COMMON AGREEMENTS
• Farming Joint Venture Agreement• Farming Partnership Agreement• Custom Feeding Agreement• Lease Agreement
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INSURANCE FOR CUSTOM FARMING
• ISO Farm Liability Coverage Form (FL 00 20)• Carrier proprietary forms• Coverage provided when receipts are relatively small
as an exception to the exclusion for Custom Farming
ISO DEFINITION
"Custom farming" means performance of specific planting, cultivating, harvesting or similar specific "farming" operations by an "insured", at a farm that is not an "insured location", when the performance is for, and under the direction or supervision of, the owner or operator of the farm or the authorized representative of the owner or operator.
But "custom farming" does not mean:
a. Operations conducted at a premises rented to, leased to or controlled by an "insured";
b. Operations for which no compensation in money or goods is received; or
c. A neighborly exchange of services.
ENDORSEMENTS
• FL 04 69 Custom Farming Liability Coverage– Used when receipts exceed $5,000– Requires identification of specific work performed– Estimated annual receipts– Rate per $1,000– Auditable exposure– Can be added to CGL
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OTHER CONSIDERATIONS
• Coverage is only provided for BI and PD• No coverage for decreased yield, market price
changes, or other economic losses• Coverage may be available under specific policies• No definition of “farm management”
INSURANCE FOR FARM MANAGEMENT
• Management firm typically provides insurance for the farming operations
• “Master” policy for all landowners to whom services are being provided
• Landowner maintains liability coverage for the ownership of the property
• Insurance requirements are detailed in the contract
INSURANCE FOR FARM MANAGEMENT
• Professional liability exposures– Failure to render sound advice– Failure to perform services– Negligent rendering of services
• Farm Liability Coverage Form contains a professional services exclusion
• Requires a Farm Management E&O Policy
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COMMON PROVISIONS
• Exclusion of BI and PD• Exception to the PD exclusion for damage caused in
“normal farming operations”• Exclusion for farm labor contracts and other
employment-related losses• Exclusions for market risk
1/9/2014
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InsightonRealEstateLeasesPresented By:
Cameron Rudolph
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PartiesInvolvedinLeases
Lessees
Obtaining Building insurance (rental income)
Paying for insurance
Lessors ‐ Building Owners
Lessors ‐ Land Owners
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RealEstateLeaseCategories
• Gross lease• Less common today
• Lessor pays all costs for property directly, including insurance
• Lessee pays straight monthly lease payments• Lease payments will be set high enough to offset maintenance
and utility expenses
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RealEstateLeaseCategories
Net Lease
• Lessor pays all expenses
• Lessee may be required to pay maintenance and utilities directly
• Retailer lessee may pay additional rent based upon a percentage of gross sales
• Lessee pays maintenance and utilities
• Monthly lease payments are reduced4
RealEstateLeaseCategories
Double Net Lease
• Lessor buys building and rental income insurance
• Lessee pays maintenance, utilities and property taxes directly
• Monthly lease payments are reduced5
RealEstateLeaseCategories
Triple Net Lease
Lessor passes several requirements to lessee
Lessee maintains the property
Pays all costs, including utilities, property taxes
and insurance
Purchased for the benefit of the lessor
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LeaseBasics
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LeaseBasics
• Memorializes terms and conditions
• Identifies the period of time in effect
• Often one year
• Can be decades in length
Written contract
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LeaseBasics
Lessor to lessee risk transfer
“Pass through” of ordinary costs
Utilities
Maintenance of premises
“Pass through” of extraordinary
costs
Damage to property
Injury to persons
Negligence or not
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LeaseBasics
Lease language
• Often archaic and “boilerplate” wording
• Legal perspective only – not risk driven
Lease review by insurance brokers
• Terms used can be confusing
• Terms used by attorneys often do not match with insurance terms
Clients often do not read the language before signing10
PremisesDescription
Check for identified unit, suite numbers,
etc.
Affects damage to premises to trigger lease cancellation or abatement of rent
Affects coverage trigger for Additional Insured – Managers Lessors of Premises 11
PropertyConcernsInsurance Solutions
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PropertyValuationActual Cash
Value
RCV
Functional RCV
Reproduction Cost
Blanket (Margin Clause)
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Lessor’sPropertyInsurance
Check lease language for proper entity(ies)
Include subsidiary property management company
Include TIBs put in by former and current tenant’s
• Lease cancelled due to loss, lessee takes insurance coverage with them to put the TIBs in their new location 14
Lessor’sPropertyInsurance
Check lease for valuation, coinsurance, inflation guard, agreed value
Identify categories of excluded property in the Building insurance
• Revise as needed15
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BuildingDefinition
• Building, meaning the structure defined in the declarations including:• Completed Additions
• Fixtures, including Outdoor Fixtures
• Permanently installed machinery and equipment
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BuildingDefinition
• Personal Property owned by you used to maintain or service building including:• Fire Extinguishing Equipment
• Outdoor Furniture
• Floor Coverings
• Appliances used for refrigeration, cooking, dishwashing, laundering, HVAC
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PropertyNotCovered
• ALL property policies differ on this
• Standard language removes:• Fences, light standards, walkways
• Pilings, piers, wharves and docks
• Outdoor fences, radio or TV antennas
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PropertyNotCovered• Retaining Walls
• Foundations
• Excavation, grading, backfilling and filling
• Underground pipes, flues, drains
• Pavement, patios or other paved surfaces
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Solutions
• Use CP 14 10 Additional Covered Property endorsement• Describe the categories of property to be included for
coverage
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Lessor’sPropertyInsurance
Perils required by lease
Include ordinance or law
Check the damage or destruction clause as well as the maintenance of
premises clause
Often transfers responsibility to lessee
after 6 months (Equipment Breakdown
coverage)
Additional perils not
addressed in the lease
Earthquake / Flood
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Lessor’sPropertyInsurance
Check lease language for proper entity(ies)
If a triple‐net lease
• Identify how to name the lessor
• Additional Insured
• Loss Payee
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Lessor’sRentalIncome
12 months coverage never long enough
Include any % of gross sales
projections (from lessees) in limit
All costs that will revert to lessor when
lease cancels
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Lessee’sPropertyInsurance
Check lease for maximum deductibles
Check for valuation, coinsurance, inflation guard, agreed value
Include TIBs paid for by lessee
• Note that many TIBs are subject to ordinance or law when rebuilding
• Property policy does not provide coverage
• Ordinance or law endorsement is specific to “building” and TIBs are covered as BPP 24
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Lessee’sPropertyInsurance
Perils required by lease
Check the damage or destruction clause as well as the maintenance
of premises clause
Often assumes responsibility after 6 months (Equipment Breakdown
coverage)
Additional perils not addressed in the
lease
Earthquake / Flood
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Tenant’sImprovementsAndBetterments(TIBs)
Permanent property
• Lease should specify at lease termination
Will convert to building owner
• Must be installed at the expense of the insured lessee
Can be covered under the lessee’s BPP property coverage
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Trade(Utility)Fixtures
These items are NOT other types of BPP
Manuscript language to policy
These are NOT covered by TIB language in the policy
Property that can be removed upon lease termination
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Lessee’sBusinessIncome
If insuring lessor’s rental income – add as Additional Insured for BI / EE or write separate
policy with building
Include Ordinance or Law – Increased Period of Restoration endorsement
Include in Business Income limit
Check cancellation / abatement provisions for obligations to continue to pay rent
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LeaseCancellation/Abatement
Check lease
language for
percentage of damage
or unusable # of days
Leasehold Interest –
TIBs
Landlord’s Loss of Lease
(company specific form)
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CausesofLoss
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CausesofLoss
Lessor AND lessee should ALWAYS have Equipment Breakdown coverage
Are “perils” specified?
Fire, EC All risk Special form
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CausesofLoss
Lessor should ALWAYS have
building ordinance coverage
Disclose to lessee NO building
ordinance coverage for TIBs 32
LiabilityConcernsInsurance Solutions
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Lessor’sLiabilityInsurance
Limits requirements
Often required to be “in addition” to lessee’s liability
insurance
Lessee required to add lessor as
additional insured
Review indemnity agreement
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Lessee’sLiabilityInsurance
Limits requirements
Requirements to add lessor as
additional insured
Lessee’s insurance to be primary and non‐contributory
Review indemnity agreement
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ContractualLiabilityRisk Transfer Typically From Lessor to Lessee
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ContractualRiskTransfer
One party (indemnitor) agrees to protect another party (indemnitee)
for certain costs in the lease
Defense Expenses
Damages To A Third Party
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RiskTransfer
Indemnified party (lessor)
transfers risk to
indemnitor (lessee)
Lessee transfers risk to their insurance program via the
contractual liability coverage
General Liability
Business Auto
Umbrella / Excess
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RiskTransfer
The lessee always assumes more risk than is transferred to insurance
These defense expenses for lessor will typically reduce the lessee’s occurrence / aggregate limit of insurance
Check lease for required limits, deductibles, retentions
• Lease sometimes place a maximum for a deductible or disallow a retention 39
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IndemnityExample
• Lessee shall assume liability for and shall hold or save harmless the Lessor with respect to damage to or injury to the Lessor, premises and property or persons of Lessor’s other tenants, or anyone else outside of this agreement, if due to an act or neglect of Lessee, or any in his employ or control.
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ExculpatoryClause
Removes all liability from lessor for causing injury, damage, loss of income to lessee as well as to third parties
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ExculpatoryClauseExample
• Lessee hereby agrees that Lessor shall not be liable for injury to Lessee’s business or any loss of income therefrom or for damage to the goods, wares, merchandise or other property of Lessee, ……whether the said damage or injury results from conditions arising out of or upon the Premises or upon other portions of the building of which the Premises are a part, or from other sources or places……
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WaiverofSubrogation
NOT always mutual
Even if mutual – only applies to insured loss
Check the lease language
Review the partial
uninsured loss
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RemainingExposures
Deductible
Underinsurance / Claims
Self‐Insurance
Non‐Insurance / Uninsured Loss
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Primary,Non‐ContributoryRequirementsThe “Other Insurance” Clause
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Primary,Non‐Contributory
Steps required
Add lessor as additional insured
Lessor’s insurance excess over other valid and collectible insurance
Lessee’s insurance
primary / no contribution by lessor’s insurance
Lease typically contains requirement that lessee’s insurance is primary
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Summary• Lease review is difficult
• Great service – increased E & O risk
• Do NOT provide legal advice
• Provide guidance for insurance solutions and control of certificates of liability and property insurance from lessees
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LeaseReviewCheckListPoints
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WhattoLookForontheLeaseReview• Parties to be named as insured(s)
• What insurance is required
• Building / Business Personal Property
• Lessor
• Lessee
• Perils
• Valuation
• Inflation guard
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WhattoLookForontheLeaseReview
• Loss of Rents
• General Liability Limits
• Additional Insured(s)
• Waiver of Subrogation
• Workers’ Compensation
• Business Auto
• Limits
• Covered autos
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WhattoLookForontheLeaseReview• Improvements and Betterments
• Build outs paid by lessor
• Build outs paid by lessee
• When does title transfer to lessor
• Who buys insurance
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WhattoLookForontheLeaseReview• Does the lease contain a cancellation provision and/or
rent abatement clause?• # of days
• % of damage
• If lessee directly pays maintenance, utilities, taxes, insurance or other costs – will revert to property owner when lease cancels
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WhattoLookForontheLeaseReview• Liability requirements
• Types of liability insurance• CGL
• BAP
• WC
• Pollution
• Additional insured requirements
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WhattoLookForontheLeaseReview• Allow or disallow
• SIR / Deductibles
• Captives, RRG, RPG
• Indemnity agreement
• Exculpatory clause
• Waiver of subrogation
• Primary, non-contributory
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