The insurance clause is one of the longest sections in an industrial lease and one of the least read. It is also one of the few places where a lease imposes recurring costs and real obligations that are easy to under-budget and awkward to fix after signing.
This guide covers the coverages a US landlord will typically require, the contractual mechanics that go with them, and where foreign-owned businesses tend to get caught.
The coverages a lease will name
Commercial general liability (CGL). The core requirement, and the coverage most commonly named in an industrial lease. It responds to third-party bodily injury and property damage arising from your operations at the premises. Typical lease requirements sit around $1 million per occurrence and $2 million aggregate, though limits scale with the size of the deal and the landlord's own risk standards. Larger tenancies frequently require an umbrella or excess policy sitting above the primary limits.
Property insurance on what you own. The landlord insures the building; you insure your side of the line. That means your inventory, racking, forklifts, equipment, and — importantly — the tenant improvements you paid for. Tenant improvements are a common gap: the fit-out was your capital, it is now physically part of the building, and whose policy responds is a question you want answered in writing rather than after a fire.
Business interruption. Not always mandated by the lease, but worth carrying. If the building becomes unusable, rent obligations may continue while your revenue does not.
Workers' compensation. Required by law in most US states for businesses with employees, and separately required by most leases. See the state variation note below.
Warehouse legal liability / bailee coverage. This one is specific to the sector and is frequently missed. If you hold goods belonging to your customers or other third parties on the premises, leases commonly require warehouser's legal liability or bailee customers insurance, in an amount tied to the value of that property as determined by your warehousing contract.
The distinction matters: your own property insurance covers your goods. It does not respond to damage to goods you are merely holding for someone else. If any part of your operation involves storing third-party inventory — even occasionally, even for an affiliate — check this before you sign.
Auto liability. If you operate vehicles, including yard trucks or delivery vans.
The contractual mechanics
Four provisions appear in almost every US commercial lease, and each does something specific.
Additional insured. The lease will require you to name the landlord — and typically their property manager, lender, and other designees — as additional insureds on your liability policies. This gives them direct rights under your policy rather than only a claim against you.
Primary and non-contributory. Leases commonly specify that your insurance is primary as to all claims, and that any insurance the landlord carries is excess and non-contributing. In practice this means your policy pays first and the landlord's is not called on to share.
Waiver of subrogation. Subrogation is the right of an insurer, having paid a claim, to step into its insured's shoes and pursue whoever caused the loss. A mutual waiver of subrogation stops each party's insurer from suing the other party. This is standard, sensible, and strongly in a tenant's interest — without it, the landlord's property insurer could pay a fire claim and then come after you.
Critically, your insurer must agree to the waiver. A waiver in a lease that your policy does not permit can void coverage. Send the lease's insurance clause to your broker before signing, not after.
Certificates and evidence. You will be required to produce certificates of insurance before taking possession, and again at each renewal. Landlords increasingly track this automatically, and failure to produce a current certificate can be an event of default independent of whether you actually hold the coverage.
Where foreign-owned businesses get caught
Your home-country policy will not satisfy the lease. US landlords require coverage written by insurers admitted or otherwise acceptable in the relevant US state, with the ability to name US additional insureds and respond to US litigation. A global programme written elsewhere may need a US-admitted local policy underneath it. Start this conversation with your broker early — placement takes longer than people expect, and you cannot take possession without certificates.
US liability exposure is not comparable to most other markets. Limits that look generous by home-country standards are often ordinary here. This is a reason to take the umbrella layer seriously rather than treating it as an upsell.
Workers' compensation is state-by-state, and one state is genuinely different. Requirements, rates, and administration are set at state level. Texas is the only state that allows private-sector employers to opt out of the workers' compensation system entirely — such employers are known as "non-subscribers." In 2024, 24% of Texas employers were non-subscribers, covering 13% of employees, according to the Texas Department of Insurance.
Opting out is not free of consequence: non-subscribers lose the statutory limits on liability that the system provides and can be sued directly by injured employees. It is a genuine strategic decision in Texas, and one to take with US counsel rather than by default. Everywhere else, treat workers' compensation as mandatory once you have employees.
Insurance is a pass-through cost too. The landlord's building insurance is one of the three "nets" in a triple net lease, billed to you as part of the NNN charge. That is separate from and additional to your own policies. See The True Cost of US Warehouse Space.
What to do before signing
- Send the insurance clause to your broker during negotiation. Ask specifically whether every requirement is placeable, at what cost, and whether the waiver of subrogation is permitted by the policies you will hold.
- Check the limits against the deal size. Push back if they are disproportionate; landlords do negotiate this.
- Confirm who insures tenant improvements, and get it in writing.
- Resolve the bailee question. If any third-party goods will sit in the building, confirm warehouse legal liability is in place and adequate.
- Diarise certificate renewals. A lapsed certificate is an avoidable default.
- Budget the premium as an ongoing occupancy cost, not a one-off.
Sources
- Vouch, Commercial Lease Insurance Requirements: What Every Tenant Should Know
- Huneycutt Group, Insurance Requirements in a Commercial Lease: A Tenant's Guide
- Law Insider, Additional Insured and Waiver of Subrogation sample clauses — standard lease language on warehouser's legal liability and bailee customers insurance
- Capes Sokol, Understanding Waivers of Subrogation in Commercial Leases
- Texas Department of Insurance, Employer FAQ and Employer Participation in the Texas Workers' Compensation System
This guide is general information, not insurance or legal advice. Coverage requirements vary by lease, state, and operation; consult a licensed US commercial insurance broker and counsel.