Illinois Subscriber

A

Presumably, the insured needs leasehold interest coverage because he or she has a favorable lease now, the cancellation of which would lead to more expense for obtaining the same favorable terms, location, etc. In a lease with no cancellation provision, the landlord could cancel at any time, leaving the insured in a precarious position.

Leasehold interest coverage is triggered by the cancellation of a scheduled lease. Note that there is a “special exclusion” in the causes of loss form used with the leasehold interest coverage form that prevents coverage where the insured cancels the lease (“we will not pay for any loss caused by: (a) your canceling the lease”).

Therefore, the insured cannot cancel the lease and turn to the policy for recovery. A lease that is absolutely silent on the matter of cancellation can prove troublesome to the tenant for many reasons, particularly where the tenant is stuck with a lease on untenantable premises with no contractual provision to protect him or her.

In short, the leasehold interest coverage form will not respond where the insured cancels the lease. Where the lease is favorable, the insured will not want it cancelled, and should be further protected with business income and expense coverages to maintain business or income in the event the leased premises are unusable for some period.