Insurance coverage Q&A: Extra expense for cannabis manufacturer's loss in rented property

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ServPro cleaned the ceiling of a large room after a fire. The ceiling belongs to the landlord who did not file a claim. The rest of the room is covered by the insurance policy for the tenant. I want to cover the cost of the cleaning under the extra expense provisions of the tenant’s policy because the tenant could not resume operations until the ceiling was cleaned. 

The insured’s facility is used for cannabis product production. That is why they have to operate in a clean environment. The landlord was not notified and therefore did not make a claim. The loss was considered by the insured to be his responsibility. Occuhealth, an industrial hygienist firm that we all use to determine the required scope, was hired to evaluate this claim. I have attached their report.

I just received the attached email from the company that did the original construction. Does this email verify that the insured’s policy should cover the cleaning as part of the building claim? The lease agreement is attached. 

— Massachusetts Subscriber

Thank you for providing the lease agreement, which clearly spells out that the tenant is responsible for the building insurance under the Triple Net agreement.

Having the ceiling cleaned as a necessity to resume operations is definitely a qualifiable extra expense. We looked at the following exclusion, but we do not see this extra expense being due solely to the assumption of contractual liability, since the extra expense is arising out of a covered physical damage loss.

(2) The following additional exclusions apply to insurance under this coverage form:

(a) Contractual liability: We will not defend any claim or “suit,” or pay damages that you are legally liable to pay, solely by reason of your assumption of liability in a contract or agreement. But this exclusion does not apply to a written lease agreement in which you have assumed liability for building damage resulting from an actual or attempted burglary or robbery, provided that: (i) Your assumption of liability was executed prior to the accident; and (ii) The building is covered property under this coverage form.

It is our opinion that this cleaning is a covered extra expense.

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