Two commercial policies were issued by two different carriers to two different parties—one to the landlord/building owner, and the other to the tenant. Both policies provide coverage for the building even though the tenant was under no contractual obligation to insure against loss to the building. Tenant was under verbal lease and had no specific lease obligation to insure building.

The policy issued to landlord/building owner by Carrier A is blanket, covering buildings at multiple locations. Policy B, issued to tenant. is specific to loss location only.

Policy A—landlord/building owner's policy—provides:

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  1. Under any property coverage provided by this policy, if there is other insurance covering the same loss or damage, we will pay only for the amount of covered loss or damage in excess of the amount due from that other insurance, whether you can collect on it or not. But we will not pay more than the applicable Limit of Insurance.

Policy B—tenant's policy—is subject to CP 00 90, and provides:

(1) You may have other insurance subject to the same plan, terms, provisions and conditions…we will pay our share of the covered loss or damage;

(2) If there is other insurance covering the same loss or damage other than that described in (1) above we will only pay for the amount of covered loss or damage in excess of….

Question 1:

Does the tenant even have a compensable insurable interest in a building where there is no lease obligation to insure against its loss? If so, how is it measured?

Question 2:

If the tenant has a compensable insurable interest, are the two policies on different levels of specificity, as a result of which the more specific policy is exhausted first, without regard to or application of the other insurance clauses? And which policy would be more specific?

Question 3:

Regarding the tenant's policy, does this CP 00 90 language—"If there is other insurance covering the same loss or damage other than that described in (1) above"—refer to other insurance in the tenant's name, or instead in someone else's name [e.g., landlord]?

Question 4:

If the landlord is adequately insured to value (coinsurance compliant) but the tenant is underinsured to value on the building and therefore in a penalty situation, how is tenant's compensable loss (if there is one) calculated?

California Subscriber

Normally, a tenant's interest is limited to its use interest in improvements and betterments and not in the building itself. So, the tenant probably has no compensable insurable interest, but this is a legal issue and not a question of coverage. If the insured were deemed to have an insurable interest in the building, we do not see one policy being more specific than the other.

Both policies cannot be excess; both would have to pay upfront.

The language in the CP 00 90 stating "If there is other insurance" could refer to insurance in someone else's name. The first provision in that clause says, "You [the named insured] may have other insurance subject to the same plan…." The second provision, the one about which you ask, does not specify "you."

If the tenant is not insured to value, the amount payable would be calculated from the tenant's standpoint and the penalty applied to the tenant's portion of the insurance.

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