Waiver of Subrogation, Additional Insured, and Commercial Lease Insurance Requirements

Every commercial lease contains an insurance section. Most tenants glance at it, hand it to their agent, and assume everything is covered. Most landlords accept a certificate of insurance and file it away, trusting it means what the lease required. Both sides are usually wrong — and neither finds out until there is a loss.

The insurance provisions in a commercial lease involve several interlocking mechanisms: waiver of subrogation, additional insured status, certificates of insurance, and specific coverage requirements. Each one is commonly misunderstood, and the gap between what the lease says and what the policies actually provide is where disputes — and uninsured losses — live.

Waiver of Subrogation on Commercial Property Policies

Subrogation is the insurer’s right to step into its insured’s shoes and pursue a third party who caused a loss. If a tenant’s negligence causes a fire that damages the building, the landlord’s insurer pays the claim and then sues the tenant to recover what it paid. That is subrogation in action — and it is exactly what a waiver of subrogation is designed to prevent.

On the general liability side, ISO provides a standard endorsement — CG 24 04(Waiver of Transfer of Rights of Recovery Against Others to Us) — that can be attached to the CGL policy. Commercial property, however, has no equivalent standalone endorsement. There is no “CP 24 04” you can simply add to a property policy.

Instead, the mechanism lives inside the policy’s conditions form. The CP 00 90 (Commercial Property Conditions) includes a condition titled “Transfer of Rights of Recovery Against Others to Us.” That condition states:

“If any person or organization to or for whom we make payment under this Coverage Part has rights to recover damages from another, those rights are transferred to us to the extent of our payment. That person or organization must do everything necessary to secure our rights and must do nothing after loss to impair them. But you may waive your rights against another party in writing before a loss occurs.”

That last sentence is the critical one. The insurer permits the insured to waive its rights of recovery, but only if the waiver is executed in writing before the loss occurs. In practice, this means the waiver of subrogation on property policies is accomplished through the lease language itself — not through a policy endorsement. The lease provision that says “each party waives its right of recovery against the other” is the waiver, and it must be in place before a loss happens.

Mutual Waiver of Subrogation in Commercial Leases

The standard approach in commercial leases is a mutual waiver of subrogation. Both the landlord and the tenant release the other from liability for property damage to the extent the damage is covered by the releasing party’s insurance. Each agrees to have its insurer waive its subrogation rights against the other.

The rationale is straightforward: landlord and tenant occupy the same property. If a loss happens, litigation between them delays repairs, poisons the business relationship, and ultimately costs more in legal fees than the recovery is worth. The mutual waiver says: let insurance handle it and move on.

A well-drafted mutual waiver of subrogation typically includes the following elements:

• Each party releases the other from liability for property damage to the extent covered by the releasing party’s insurance (or the insurance required to be carried under the lease, whichever is broader)
• Each party agrees to have its insurer waive its right of subrogation against the other
• The waiver applies regardless of the cause of the loss, including the negligence of the released party
• The waiver is mutual — it protects both landlord and tenant

Both parties should notify their carriers about the mutual waiver provision and confirm that the waiver is permitted under the policy. Most standard commercial property policies allow pre-loss waivers through the CP 00 90 language described above, but some manuscript or non-standard policies may restrict or prohibit them. If the carrier will not allow the waiver, the tenant or landlord needs to know before the lease is signed — not after a fire.

CP 12 19 — Additional Insured (Building Owner)

Some commercial leases require the tenant to provide property coverage on the building and name the landlord as an additional insured on that coverage. This is common in triple-net (NNN) leases, where the tenant is responsible for insuring the building in addition to its own contents and improvements.

The ISO endorsement that accomplishes this is CP 12 19 — Additional Insured — Building Owner. This endorsement adds the building owner as a named insured on the tenant’s commercial property policy, but only with respect to direct physical loss or damage to the buildingdescribed in the endorsement schedule. The building owner receives the same rights as the named insured for that specific coverage — including the right to file a claim and receive payment directly.

It is important to understand what CP 12 19 does not do:

• It does not cover the building owner’s personal property or business income
• It does not extend to other locations or properties the owner may have
• It does not convert the tenant’s policy into the owner’s policy — the tenant remains the first named insured with control over the policy
• It does not eliminate the need for the building owner to carry their own property insurance on the building as a backstop

The CP 12 19 endorsement is less common than the CGL additional insured endorsement (CG 20 11 or CG 20 26), but it fills a specific gap in NNN and similar lease structures where the tenant bears responsibility for building coverage. If your lease requires it, confirm with your broker that the endorsement has actually been added to the policy — not just referenced on a certificate.

Certificate of Insurance Limitations

The certificate of insurance is the most relied-upon and most misunderstood document in commercial leasing. It is a summary — nothing more. The two most common certificate forms are ACORD 25 (for liability policies) and ACORD 28 (for property policies). Both carry the same fundamental limitation.

The standard ACORD language states:

“This certificate is issued as a matter of information only and confers no rights upon the certificate holder. This certificate does not affirmatively or negatively amend, extend or alter the coverage afforded by the policies below.”

In plain language, this means:

• A certificate does not amend, extend, or alter the coverage provided by the actual policy
• A statement on a certificate that someone is an “additional insured” does not make them one— the actual policy must contain the endorsement
• A certificate cannot verify that a waiver of subrogation is in effect — only the policy language and the lease itself can establish that
• The certificate holder has no legal rights under the policies listed unless they are actually named on an endorsement attached to the policy
• Coverage can be cancelled or non-renewed without the certificate holder’s knowledge, and the “notice of cancellation” language on most modern ACORD forms is aspirational at best

E&O Exposure for Insurance Agents

Agents who issue certificates stating that additional insured status or waiver of subrogation is in effect — when the policy has not actually been endorsed to provide those features — create significant errors and omissions exposure for themselves and their agency. If a loss occurs and the landlord discovers they are not actually an additional insured despite what the certificate says, the agent who issued the misleading certificate may be liable for the resulting damages. This is not a theoretical risk — it generates real E&O claims with regularity.

Standard Commercial Lease Insurance Requirements

While every lease is different, most commercial leases require a similar set of insurance provisions. Understanding the standard framework helps you identify what your specific lease requires and whether your coverage actually matches.

Tenant’s Insurance Obligations

The tenant is typically required to carry:

• Commercial General Liability (CGL): Usually $1,000,000 per occurrence and $2,000,000 general aggregate, with the landlord named as an additional insured (typically via CG 20 11 or CG 20 26)
• Commercial Property:Coverage on the tenant’s business personal property (BPP) and tenant improvements and betterments (TI&B), typically on a replacement cost, special form (all-risk) basis
• Business Income and Extra Expense:To cover the tenant’s lost income during a period of restoration
• Workers’ Compensation:Statutory limits as required by state law, plus employer’s liability
• Umbrella or Excess Liability: Many leases require $1,000,000 to $5,000,000 in umbrella coverage, following form over the CGL

Landlord’s Insurance Obligations

The landlord is typically responsible for:

• Building Coverage: Commercial property insurance on the building structure itself, on a replacement cost, special form basis
• Loss of Rents: Coverage for rental income lost during a period of restoration when the building is damaged and tenants cannot occupy their spaces
• Commercial General Liability:The landlord’s own CGL policy covering premises liability

In NNN lease structures, some of these obligations shift to the tenant, including building coverage. This is where CP 12 19 becomes relevant — the tenant insures the building and adds the landlord as additional insured on the property policy.

Additional Insured Status

The lease will almost always require the tenant to name the landlord as an additional insured on the tenant’s CGL policy. This gives the landlord coverage under the tenant’s liability policy for claims arising out of the tenant’s operations or use of the premises. Common endorsements include:

• CG 20 11:Additional Insured — Managers or Lessors of Premises (covers ongoing operations only)
• CG 20 26:Additional Insured — Designated Person or Organization (broader, but coverage depends on edition date)
• CG 20 37:Additional Insured — Owners, Lessees or Contractors — Completed Operations (adds completed operations coverage)

Mutual Waiver of Subrogation

As discussed above, the lease should include a mutual waiver of subrogation applicable to property losses. Both parties agree to look to their own insurance first and release the other from liability for covered property damage.

Certificate of Insurance as Evidence

The lease will require the tenant (and sometimes the landlord) to provide a certificate of insurance as evidence that the required coverages are in place. Remember: the certificate is evidence, not proof. It is a starting point for verification, not the finish line.

When the Lease Requires Coverage the Policy Does Not Provide

This is where commercial lease insurance goes wrong most often. The lease was drafted by an attorney. The insurance was placed by a broker. They did not talk to each other. The result is a gap between the contractual obligation in the lease and the actual coverage in the policy — and neither the landlord nor the tenant discovers it until a claim is filed.

Common Gaps Between Lease Requirements and Policy Coverage

• Lease requires “all risk” coverage, but the policy is named peril:The lease says the tenant must carry “all risk” or “special form” coverage, but the broker placed a basic or broad form policy. The tenant believes they are compliant because they have a property policy. They are not.
• Lease requires waiver of subrogation, but no pre-loss waiver was executed:The lease provision itself may serve as the waiver, but if the lease was signed after a loss — or if the relevant provision was in an amendment that was never finalized — the waiver may not be enforceable.
• Lease requires ordinance or law coverage, but no CP 04 05: Many commercial leases require the tenant to carry ordinance or law coverage to pay for code upgrades required during reconstruction. Without the CP 04 05 endorsement (or its equivalent), that coverage does not exist on a standard commercial property form.
• Lease requires replacement cost, but the policy settles at ACV:If the policy’s loss settlement condition defaults to actual cash value — or if the replacement cost option was never elected — the tenant may receive depreciated payments that are insufficient to meet the lease obligation to restore the premises.
• Lease requires coverage for landlord’s property in tenant’s care, custody, or control:The standard CGL policy excludes property in the insured’s care, custody, or control. If the lease makes the tenant responsible for damage to the building (beyond the mutual waiver framework), this exclusion creates a gap.
• Certificate says “additional insured” but the endorsement was never issued:The agent noted it on the certificate to satisfy the landlord, but the endorsement was never actually attached to the policy. At claim time, the landlord discovers they have no coverage under the tenant’s policy.

Agent E&O Exposure

When a broker issues a certificate of insurance that purports to show coverage matching the lease requirements — but the policy does not actually provide that coverage — the broker has created E&O exposure. If a loss occurs and the coverage gap is discovered, the broker may be liable for:

• The amount of the uninsured loss
• Consequential damages from the lease breach
• The landlord’s attorneys’ fees in pursuing the coverage dispute
• The cost of any force-placed insurance the landlord obtained

This is why a careful broker will ask for a copy of the lease’s insurance requirements before placing coverage and issue an endorsement checklist against the lease provisions. Too many brokers never read the lease.

Practical Advice: What to Verify Before Signing the Lease

Whether you are a tenant or a landlord, the time to audit insurance compliance is beforethe lease is executed — not after a loss. The following steps apply to both sides of the transaction.

For Tenants

1. Give your broker a copy of the lease’s insurance requirements before you sign. Not after. Not a summary. The actual lease language. Ask the broker to provide a written confirmation that the proposed coverage meets every requirement.
2. Confirm the coverage form.If the lease requires “special form” or “all risk,” make sure you are getting CP 10 30 (Causes of Loss — Special Form), not CP 10 10 (Basic) or CP 10 20 (Broad).
3. Confirm the loss settlement basis. If the lease requires replacement cost, confirm that the policy includes replacement cost valuation, not just ACV.
4. Verify that the additional insured endorsement has been issued.Ask your broker for a copy of the actual endorsement — CG 20 11, CG 20 26, or whichever form the lease specifies — not just a certificate.
5. Confirm your carrier permits pre-loss waiver of subrogation. Most standard ISO forms do. Some non-standard or surplus lines forms do not. Get written confirmation from the carrier or the broker.
6. Check for ordinance or law coverage. If the lease requires it, you need CP 04 05 or equivalent. It is not included in the base form.
7. Document everything.Keep copies of the endorsed policy, the certificate, and the broker’s confirmation letter. If a dispute arises, you will need them.

For Landlords

1. Do not accept a certificate of insurance as sufficient proof. A certificate is a starting point. Request copies of the actual additional insured endorsement and confirm the policy form and coverage limits match the lease requirements.
2. Calendar annual verification.Policies renew every year. An endorsement that was in place last year may not be on this year’s renewal. Build an annual compliance audit into your property management process.
3. Confirm that your own policy permits the mutual waiver of subrogation. If your carrier does not allow it, you could be in breach of your own lease provision, and your insurer may have subrogation rights you assumed were waived.
4. Coordinate your insurance requirements with your attorney. The attorney drafting the lease should consult with an insurance professional to ensure that the requirements in the lease are actually achievable in the insurance market. Requiring coverage that does not exist or is not commercially available creates a compliance trap.
5. Consider requiring the tenant to name you on an ACORD 28 (property certificate) in addition to the ACORD 25 (liability certificate). Many landlords only request the ACORD 25 and never verify the property coverage at all.
6. Establish consequences for non-compliance. The lease should specify what happens if the tenant fails to maintain required coverage: notice, cure period, right to place coverage and charge the tenant, and potential default.

What to Demand from Your Broker

Whether you are the tenant or the landlord, your broker should be doing more than issuing a certificate. Demand the following:

• A written lease compliance review comparing every insurance requirement in the lease against the actual policy provisions
• Copies of every endorsement referenced on the certificate — not just the certificate itself
• Written confirmation that the carrier permits the waiver of subrogation
• A renewal reminder system so that compliance is verified at every policy renewal, not just at lease inception
• Immediate notification if any required coverage is cancelled, non-renewed, or materially changed