Connect Coverage to the Actual Operation
Lessor’s Risk Only (LRO) insurance is commonly used for commercial property owners whose principal operation is owning and leasing a building or premises to one or more tenants. The insurance review should identify the named insured and ownership entity, building use, tenant occupancies, lease responsibilities, common areas, parking, maintenance, contractual risk transfer, property values, rental income, catastrophe exposure, and whether additional liability or property coverage is needed. LRO is not a substitute for every coverage a building owner may need; the final policy structure depends on the actual property, tenants, lease terms, insurer eligibility, and issued policy.
Risks to Review
- Slip-and-fall, trip-and-fall, and other premises liability allegations involving tenants, customers, visitors, parking areas, sidewalks, common areas, or building features
- Fire, water, wind, hail, theft, vandalism, equipment, roof, utility, and other property damage affecting the owned building
- Loss of rents or rental income following a covered property loss
- Tenant operations that increase fire, liability, crime, pollution, cooking, habitational, entertainment, or other exposures
- Contractual gaps involving maintenance, indemnification, additional-insured status, waivers, repairs, improvements, and insurance responsibilities
Information to Prepare
- Property address, ownership entity, year built, construction, square footage, number of stories, roof age, and major system updates
- Complete tenant schedule showing each tenant’s business operations, occupied square footage, lease term, and any vacancy
- Building replacement value, landlord-owned contents, equipment, improvements, annual rental income, and requested limits
- Copies or summaries of lease insurance provisions, maintenance responsibilities, indemnification, waivers, and additional-insured requirements
- Parking, sidewalks, common areas, elevators, sprinklers, alarms, security, utilities, inspections, maintenance procedures, and catastrophe controls
- Current insurance, requested effective date, mortgagee or lender requirements, and five years of currently valued loss runs when available
Frequently Asked Questions
What is Lessor’s Risk Only insurance?
Lessor’s Risk Only, commonly abbreviated LRO, generally refers to insurance for a property owner or landlord whose principal exposure is ownership and leasing of commercial premises. Depending on the program, it may include premises liability and can be combined with commercial property, loss-of-rents, umbrella, equipment breakdown, ordinance or law, flood, and other coverage where appropriate.
Does LRO cover the tenant’s business operations?
Not automatically. The tenant normally needs insurance for its own operations, property, employees, vehicles, professional exposures, and other risks. The landlord should verify lease requirements and tenant evidence of insurance, but a tenant policy does not replace the landlord’s own coverage.
Can LRO include building property coverage?
Yes, many commercial real estate programs can combine landlord liability with building property and rental-income protection, subject to underwriting and policy terms. The exact form and eligibility vary by insurer and property.
Why does the tenant list matter for LRO underwriting?
Tenant operations can materially change the fire, liability, catastrophe, crime, pollution, cooking, visitor, and occupancy exposure of the building. Accurate tenant use is essential to classification and market selection.
What information is usually needed for an LRO quote?
Underwriters commonly need the property address, ownership entity, building construction and updates, square footage, values, tenant schedule and operations, lease responsibilities, rental income, protection features, prior losses, requested effective date, and other property-specific details.
Coverage descriptions are general. Eligibility, availability, limits, deductibles, valuation, exclusions, and policy terms vary by operation and insurance market. Actual policy documents control.