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april 2015 year
april 2015 year
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4 Most Relevant Insurance Products for Retail Chains

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Due to the current economic slowdown retain chains, just like any other business in the country, tend to cut their expenses as much as they can. Unfortunately insurance expenses turn out to be the first ones to be considered irrelevant. This refers not only to health insurance expenses but to inventory and premises insurance as well.   

At the same time the more stores the chain is comprised of, the harder it is for it to curtail insurance expenses.  Normally insurance is required under lease agreements while the list of perils may differ greatly as it depends on the prospective of specific legal counsel drafting each particular lease agreement. Ironic as it is some requirements can sometimes contradict the common sense or even each other.

In this article we attempted to combine the most frequent requirements set forth by the owners of trade and entertainment centers for the retail chains operators and to analyze whether or not they are adequate from the lessee’s point of view.

Third Party Liability Insurance is the Most Popular Requirement

Such policy covers the possible injury or property damage caused to the third parties due to the fault of the lessee. A visitor of TEC can be entitled to the indemnity should he slip on the wet floor or is injured by the loose storage stand.   

The owner of the premises does not automatically fall within the category of third parties. Therefore the TPL insurance doesn’t cover any damage caused by the lessee’s operations.
The owner of the premises does not automatically fall within the category of third parties. Therefore the TPL insurance doesn’t cover any damage caused by the lessee’s operations. The relations between these two parties are specified by the lease agreement. In order to include the lessor in the TPL policy coverage the specific clause must be added to the agreement.

Please note that subtenants such as ATM or any other facilities’ owners are not covered either.

The second most popular requirement is to insure the leased premises with the insured sum being calculated based on the value of 1 sq.m. of leased property.

It’s worth remembering that should this property serve as the collateral for a bank and insured accordingly, the second insurance agreement concluded by the lessee is the sure example of double insurance from which the lessor doesn’t benefit at all. Quite frequent are cases when the TEC owner seeks to transfer his insurance expenses by imposing the requirement to insure each particular leased premise by the lessee. Even if all the tenants comply and conclude the insurance agreements, some parts of the TEC such as hallways, elevators, stairways, technical premises etc. are still bound to be left out of the coverage. Statistically however they are the ones which suffer from the insured events the most. 

Besides lessees are likely to avoid paying for such perils as windstorm, hail, water damage and so on since they can not be blamed for any of those.

Contents insurance is another requirement.

Contents usually mean inventory and equipment owned by the retail chain operator. We find such requirement a bit strange since the lessor should not have a say regarding the property he doesn’t own. That should be left purely for lessee’s disposal.

The only logical explanation of including such a requirement into a lease agreement is to protect the TEC owner from the claims for the damage caused due to his fault to the lessee’s property. They naively believe that all the damage will be covered by an insurance company. That simple fact that after paying indemnity an insurance company is free to exercise its right of subrogation is being usually neglected. 

Last but not the least is a requirement to insure employees.

To be fair, such requirement is quite rare but nonetheless probable. Lessor can require either employer liability insurance or casualty insurance for the lessee’s employees. While the price of such policies can be high, the claim settlement process will still be much higher. Should an employee be injured, work-related injury certificate would be the principal document necessary for the indemnity payment. At the same time this document alone can cause serious troubles for the retail chain operator. The consequences can range from a fine to complete closure of the stores. We still can’t see why the small store owner would want to have such insurance.