Many hotel, motel, B&B and apartment owners in Australia’s Accommodation sector enjoy the benefits of renting a Commercial Property. As opposed to owning, renting can significantly reduce the business’s risk in terms of capital and up front costs while offering the opportunity for greater business flexibility.
In some cases, as part of the tenant-landlord lease agreement, the tenant must take out liability insurance on behalf of the landlord. However it is not possible for both to be listed on one insurance policy and a separate policy must be taken out under the name of the landlord.
As a result, insurance brokers are often asked:
Why can’t a landlord be listed as an insured on my policy?
The simple answer is that the occupier (the accommodation business) and the owner (the landlord) operate as separate legal entities.
First and foremost, the landlord cannot be listed on the tenant’s policy as the insurance requirements of each entity are different. While the tenant requires an operator’s policy, the landlord needs property owner’s liability. Furthermore, as mentioned above, the tenant and landlord operate as separate legal entities. Under Australian law, this means that each business has their own legal liabilities, and neither entity can insure for the other’s legal liabilities.
Your Policy Limit refers to the maximum amount (in $) that an insurance policy will provide over a given period of time or over the life of your policy.
One policy has one policy limit regardless of the number of insured parties. This could cause a potential issue for a tenant / landlord agreement as the amount of cover available to one entity may be diminished with two names on the policy. Under no circumstance will an insurance policy recognise separate limits for each insured entity.
Having two parties insured under one policy can cause innumerable problems in the event of a claim. Not only are lines blurred as to how much remuneration each party would receive from a claim payment, but if subrogation occurs, the procedure can be extremely complicated.
Subrogation is the right for an insurer to pursue a third party that caused an insurance loss to the insured. For example, if the tenant wanted to make a claim against a landlord on the same policy, it becomes very difficult.
In some very specific instances, a landlord can be listed on a tenant’s policy if a business relationship exists between the entities.
Contact the underwriters at Breeze for more in-depth advice or information.
Conditions apply for each policy and the information expected from you for a policy to trigger. Coverage may differ based on specific clauses in individual policies. Please ask your broker to explain the additional benefits and exclusions pertaining to your policy.
The information provided is general advice only and does not take account of your personal circumstances or needs. Please refer to our financial services guide which contains details of our services and how we are remunerated.