Today's consumers want to do more than just shop; they want experiences like dining, entertainments centers and outdoor events like concerts and festivals. These add-ons help improve the mix of options available to customers, which mall operators hope translates into more frequent and longer visits, higher spend and greater loyalty.

These changes, however, can also introduce new risks that require an operator to reassess both the mall's safety and insurance coverage.

“For example, with a restaurant, you're introducing more significant fire exposure,” says Morneau. “The current location might be designed with limited fire protection. Therefore, the space may need different types of sprinkler or ventilations systems.”

Other attractions, such as a trampoline park, carry much more complex risks. It is essential in all cases to get to know the tenant, their experience and the potential risks associated with the new exposure.

“What is their reputation?” he says. “What equipment will be installed, and how often does it need to be serviced? Who's installing it, and what are their qualifications? The tenant's employees may also need special training. Oftentimes, we find the contractual obligations of that tenant need to be much more stringent.”

In addition, tenants offering higher-risk attractions may only able to obtain general liability coverage from the excess and surplus (E&S) market. This can addcomplexity for the mall operator, as E&S policies are non-admitted. “It's important to understand the tenant's policy and to make sure there are no odd exclusions that could put the facility at risk in the event of a large loss,” says Morneau.

Special steps for outdoor events

Outdoor venues like concerts or festivals present their own challenges. A mall operator should vet all vendors to ensure they understand how to manage event activities. How, for example, will food be prepared? Will the vendor adhere to local and state health and safety codes? How will event staff manage injuries, first aid and other emergencies? Will the setup crew follow electrical and fire safety guidelines for all temporary lighting, wiring and equipment?

The mall operator may also need to consider special events coverage, which names the city or town as an additional insured. Special events coverage can also provide important protection for event-related exposures that the mall operator's standard insurance might not consider.

Security can also be a major concern at outdoor venues. While organizers have historically focused on the venue itself, they must also consider the surrounding real estate today, as reflected by the recent mass shooting at a country music festival in Las Vegas, where the assailant attacked from the window of his hotel room. This might involve working closely with separately managed properties nearby and coordinating with municipalities.

Mitigating the new mall's risk

Mall operators certainly face a greater range of risks than ever before as former retail meccas begin serving a new purpose, but they can prepare and protect themselves by understanding the risks and implementing mitigation programs.

Review protocols

A new mix of tenants may mean new protocols. Increased foot traffic, for example, may require adjustments to maintenance schedules to minimize risks from slippery floors. Parking lot safety, fire safety and general security must all be re-evaluated as a mall transforms. Mall operators should also ensure that tenants have adequate crisis management plans that reflect the actual risks of their operations.

Contracts and coverage

Contracts and insurance coverage must also be examined — and perhaps altered. Standard contractual requirements like hold-harmless indemnity and additional-insured status are critical, says Morneau. In addition, contracts should be clear and unambiguous, use appropriate risk-transfer language and clearly allocate responsibilities, specifying that tenants are responsible for maintenance, inspections and equipment repairs.

Each tenant's insurance needs should also be evaluated. At a minimum, tenants' general liability policies should contain limits of $1 million with a $5 million umbrella; higher-risk tenants should have higher limits.

Construction considerations

Finally, as malls accommodate a new range of attractions, operators must be mindful of their current coverage, their spaces' physical changes and how any work is performed. The mall operator's policy may have construction exclusions, so he or she may need to obtain additional coverage before starting work. In addition, changes to older buildings may require that the structure be brought up to current building codes. It is also important to carefully evaluate the general contractor's reputation and insurance coverage. Finally, adequate security during construction — such as lighting, cameras and frequent checks by security personnel — is key to limiting the risk of theft or property damage.

Partnering with insurance experts

One way that mall operators can stay ahead of new risks is by collaborating with insurance brokers and carriers that understand their specific challenges and can help them protect their properties, finances and reputations. Today's mall operators face a new reality thanks to e-commerce and changing consumer tastes. It is important to adapt to new realities as they seek to modernize their malls — but it is equally important that they understand, evaluate and address the new risks they may be taking on in this modern era.