Who Is Responsible for Warehouse Insurance — Landlord or Tenant?
When a business leases an industrial warehouse, an important question arises: who is responsible for insuring the building, stock, fit-out and activities on the site? The answer is not simply 'the landlord' or 'the tenant'. Different risks belong to different parties, and the lease and insurance policies must be considered together.
An owner may insure the warehouse building while the business operating inside it needs cover for its own goods and operations. The fact that one party pays or reimburses an insurance premium does not automatically mean the other party's assets are insured.
What Does the Warehouse Landlord Usually Insure?
The building owner will commonly arrange insurance for the warehouse structure and the fixtures and improvements for which the owner is responsible. Depending on the policy and the owner's requirements, the arrangements may also include loss of rental income following insured damage and property owners' liability.
For example, a landlord whose warehouse is damaged by an insured fire may face major reconstruction costs and an extended interruption to rent. Building and loss-of-rent cover address different interests, so both should be considered rather than assuming the building section automatically pays lost rent.
What Does the Warehouse Tenant Usually Insure?
The tenant normally needs to assess insurance for its own business assets and exposures. A wholesaler, for example, may hold several million dollars of stock inside a building owned by somebody else. The landlord's building policy does not automatically protect that stock.
Stock and inventory, including appropriate peak-season values
Machinery, warehouse equipment, racking and tenant-owned fit-out
Business interruption following insured damage to insured business property
Public and products liability associated with the tenant's activities
Goods in transit, customer-owned goods or other specialist exposures where applicable
Whether a particular fit-out item, refrigeration plant or glass panel is the landlord's or tenant's insurance responsibility should be checked against the lease and each policy's definitions.
Who Pays the Building Insurance Premium?
Some commercial leases provide for the tenant to reimburse the landlord's building insurance as an outgoing. That is a financial arrangement under the lease: it is not a substitute for checking who is named as insured, which property is covered and who can make a claim.
Lease terms and any applicable tenancy legislation can affect which outgoings are recoverable. Do not assume every lease has the same rules.
Special Issue: The Tenant's Activities Can Change the Building Risk
An industrial tenant storing ordinary packaged goods may present a different risk from one carrying out spray painting, woodworking, food processing or lithium battery charging. Even when a landlord has no involvement in the business, the occupancy can affect the building insurer's assessment.
Owners should obtain an accurate description of the intended use and check what notification is required when a new tenant moves in or changes operations. Tenants should avoid describing a manufacturing or processing business merely as 'storage' when seeking cover.
Five Checks Before Signing a Warehouse Lease
Identify which party is to arrange building and property owners' liability insurance
Specify who insures landlord fixtures, tenant fit-out, machinery, glass and signs
Confirm the required public liability limits and interested-party arrangements
Check whether the owner needs loss-of-rent cover and whether the tenant needs business interruption cover
Review notification obligations for changes in use, vacancies, building works and hazardous materials
A Practical Example
Suppose an investor owns a warehouse leased to a distribution company. An insured fire damages the structure and destroys the tenant's imported products. The owner's policy may respond to eligible building damage and, if insured, rental income loss. The tenant would look to its own policy for insured stock loss and any eligible trading interruption. Each claim depends on its wording, limits and circumstances.
Frequently Asked Questions
Does the landlord's policy cover tenant stock?
Not automatically. The business should check that stock, equipment and its other interests are insured under an appropriate policy.
Can the lease make the tenant responsible for building cover?
Certain leases allocate unusual insurance obligations. Any such arrangement should be reviewed with legal and insurance advisers, rather than assuming a standard tenant policy covers the whole building.
Does a certificate of currency prove every lease obligation is met?
No. It is useful evidence of specified cover at a point in time, but the lease and policy terms still need to be compared.
Request a Warehouse Insurance Review
Clarke Lyons Insurance assists Australian warehouse operators, industrial landlords and commercial property investors with reviewing available insurance options. If your cover is approaching renewal, contact our team to discuss the property, activities and existing arrangements.
Explore the relevant service: Industrial Property Insurance.
For insurance of operations and stock, see our Warehouse Insurance page.
You may also find our guide on industrial warehouse insurance costs helpful.
Email Clarke Lyons Insurance at gareth@clarkelyons.com.au to discuss a review.
General information only. Cover, availability and any claim response are subject to insurer acceptance and the relevant policy wording, conditions, limits, excesses and exclusions. Seek advice appropriate to your circumstances.
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