I maintain that “acquired or made” means that the tenant must have actually paid for them, had them installed, or personally installed them. But often subscribers counter that the term should encompass a tenant paying a higher rent because the property was built-out by the owner.

I don't think that qualifies. After all, how can we prove that the additional rent actually subsidized the build-out? How much of the rent should be allocated to the basic real property and how much to the fixtures and alterations that made the space suitable for the tenant's use?

Quite often, this argument arises when a lease states that the tenant must replace owner-installed fittings if they are damaged or destroyed. But that doesn't change the situation — regardless of what the lease says, if the tenant didn't actually pay for the build out, they do not qualify as I&B for insurance coverage purposes. If they don't, tenants are out of luck if they are destroyed and they have to assume the cost of rebuilding them.

The concept of coverage for I&B is tricky, but coverage language is very clear on the matter. The tenant must actually pay for the build-out in order for the standard policies to respond. It's too late to read the lease after the building burns down.

Have you encountered this situation? How have you handled it?

This blog post is meant to provide insights into insurance coverage issues in general, and does not necessarily account for the differences in law and practice in different venues. As such, the opinions expressed within should not be construed as legal advice for the unique circumstances of any particular claim or suit.