Follow the written rule to avoid unnecessary liability and property exposures.

When you lease property to others, it’s important to take precautions, because you could be held liable for serious losses, including damage to property, injury to others or even loss of life.

Consider these four scenarios:

  1. Co-op leases a chemical sprayer to a farmer. The sprayer malfunctions, seriously injuring the farmer and destroying his crop. The farmer sues the co-op for damages.
  2. Convenience store owner leases his building. A customer falls on the premises and is injured. The lessee does not have insurance, so the customer sues the owner.
  3. Co-op owner leases a building. A fire occurs that destroys the building and kills one person. The lessee has insurance; however, the costs exceed his limits. The co-op is held liable for the remaining costs.
  4. Implement dealership leases equipment but does not provide written instructions for using it. A lessee misuses the equipment and injures someone. The dealership is sued for not providing instructions.

How can you protect yourself from liability exposure?

Put it in writing. Require your lessee to sign and abide by a written lease agreement that:

  • Outlines the duties of the lessee with regard to the use, maintenance and care of the property
  • Includes an indemnification/hold harmless clause
  • Requires the lessee to secure and maintain an insurance policy that carries medical payments and liability coverage with limits equal to or greater than your limits
  • Requires the lessee to list you as an additional insured under the lessee’s policy
  • Requires the lessee to provide a certificate of insurance with adequate limits of fire legal liability insurance to replace the property in the event of a loss caused by your lessee
  • Requires the lessee to update the certificate of insurance annually
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