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Fire Legal Liability Insurance: What Equipment Dealers Need to Know

By Amy Burdick | Posted on January 30, 2024

Equipment Industry| Ricker+Associates| General Insurance Education

How prepared is your business for a catastrophic event, such as a fire? A fire has the potential to cause major financial setbacks to your business. It’s crucial to have a plan in place to mitigate the effects it could have. 

Imagine there was a fire in the building that you are renting for your business. Who is liable for damages in the event of a fire– you or your landlord? Even if you and the building owner are fully insured, it’s not an obvious answer. For that reason, it is vital that you know the details of your rental agreement, as well as the exclusions and coverage limits of your insurance policies. 

What is fire legal liability?

As its name implies, fire legal liability insurance is for only fire-related losses and damage for those renting a facility for business. It is coverage added onto a commercial general liability insurance policy. It’s possible to purchase coverage for the specific space that the dealer is renting or leasing, not the entire building.

Consider this real-life scenario: an equipment dealer had a fire break out in the building they were renting. The fire was the dealer’s legal liability since they caused the fire. The building owner did have property insurance, and the fact was noted on the rental agreement. However, the fire was the dealer’s legal liability because he caused the fire, so the building owner was not considered liable. Therefore, the landlord’s insurance was not obligated to pay for the damages caused by the dealer.

Your lease agreement

Make sure to review your rental or lease agreement to determine liability in the event of a fire. Your lease agreement should include a clause that details all insurance obligations. If you, as the dealer, are named as an additional insured on the property owner’s policy, you’re covered under the owner’s policy. However, if it is not specifically included in the lease, you must purchase fire legal liability insurance separately. Unless specified otherwise, the liability of any fire damage caused by the tenant and employees will be on the tenant, not the owner of the building.

What fire legal liability covers…. and doesn’t cover.

The purpose of Fire Legal Liability insurance is to cover business owners who are renting a facility from the costs of fire damage due to negligence or fault. It also protects the dealer from the costs of damages that extend beyond their facility. If the landlord should have grounds to sue the dealer for the cost of repairs, this coverage provides them with the finances to pay for legal fees. The policy also pays for any damages or settlements due to the lawsuit. 

Fire legal liability only pays for damages the fire caused to an owner’s property. It does not cover the equipment or contents of the dealer’s business. While it also covers injuries inflicted on others as a result of the fire, it won’t pay for personal injuries.

Do you have any more burning questions about fire legal liability insurance? Would you like an evaluation of your current insurance coverage to ensure that it’s meeting your needs?

If you have questions about insurance for equipment dealers or renters, reach out to us!

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