Lessor’s Risk Only (LRO) insurance is a critical but often misunderstood tool in a retail agent’s toolbox, especially when helping commercial property owners manage liability and property exposures tied to leased spaces. While the name might sound niche, this coverage plays a central role in protecting landlords from the financial consequences of tenant-caused damage or on-site injuries. For insurance agents working with retail centers, office buildings, or multi-tenant commercial properties, understanding the nuances of LRO policies, and how to structure submissions effectively, can be the key to securing the right protection for clients.
This article will explore what LRO covers, why it matters, and how retail agents can work with wholesale partners to place high-quality accounts, even in complex or high-risk cases.
Lessor’s Risk Only insurance provides liability and property coverage for owners of commercial buildings leased to tenants. Also referred to as landlord insurance, LRO policies are tailored to protect the property owner from losses associated with tenant negligence, property damage, or injuries that occur in shared areas like hallways, lobbies, and parking lots.
The core function of an LRO policy is to shield the building owner, not the tenant, from potential lawsuits or claims. While tenants should maintain their own general liability and property insurance for the space they lease, LRO fills the coverage gap that exists when incidents happen in areas under the owner's control or when tenant-related incidents create downstream liabilities.
The primary coverage components of an LRO policy include property damage and liability protection. Property coverage responds to events such as fire, wind, theft, vandalism, and burst pipes. If a storm renders a retail space uninhabitable and the landlord loses rental income as a result, LRO can help cover that financial loss. The same applies to smoke damage from fires or structural issues caused by weather-related events.
On the liability side, the policy provides coverage for bodily injury or property damage claims made by tenants. A common example is a tenant who slips and falls in a poorly lit hallway or icy parking lot, areas typically under the building owner’s control. These scenarios fall under premises liability, and LRO steps in to manage the legal and financial exposure.
It’s worth noting that LRO is not a standalone cure-all. It works best when layered with other policies like umbrella coverage to form a comprehensive insurance package for commercial landlords.
While LRO fills an important gap, it also has well-defined limits. Notably, it does not cover injuries or property damage involving third parties, such as delivery drivers or customers of the tenant. Those exposures fall under the tenant’s own general liability policy.
LRO also does not cover direct losses to the landlord’s own business operations, as it is intended strictly for landlords leasing property to others, not operating their own business on-site. It is possible to write LRO in conjunction with owner occupied spaces.
Similarly, routine maintenance issues, normal wear and tear, or cosmetic damage often fall outside the scope of coverage. These exclusions should be clearly explained to clients to set accurate expectations and avoid coverage gaps.
One of the most strategic uses of an LRO policy is in managing landlord liability through tenant insurance requirements. Most leases should include language requiring the tenant to name the landlord as an “additional insured” on their general liability policy. This ensures that if a claim arises from tenant operations, the tenant’s policy will defend the landlord first.
Additional risk transfer tools include requiring “primary and non-contributory” wording, ensuring the tenant’s policy pays first, and waivers of subrogation to prevent the tenant’s insurer from seeking reimbursement from the landlord. For agents, making sure clients implement these lease provisions can drastically reduce claim exposure and improve the insurability of the account.
Premiums for LRO insurance vary widely based on the nature of the property and the tenants occupying it. Several key underwriting factors include:
When preparing an LRO submission, agents can significantly improve their chances of favorable terms by including detailed and organized documentation. A strong LRO submission includes:
Some LRO risks, especially those with poor loss history, high-hazard tenants, or layered occupancy, may fall outside the appetite of standard markets. This is where a wholesale partner like Novatae becomes invaluable. As a wholesale broker with deep market access and underwriting expertise, we can help retail agents:
In many cases, we’re able to unlock markets retail agents can’t access directly, especially for specialty placements or accounts needing creative structuring. Whether it’s walking you through policy endorsements or helping interpret inspection reports, our role is to help you win.
Lessor’s Risk Only insurance is more than just a box to check, it’s a powerful tool for commercial property owners to protect themselves against everyday liability and unexpected property damage. For insurance agents, being able to confidently explain this coverage, identify gaps, and prepare thorough submissions is key to building trust and long-term client relationships.
If you’re working on an LRO account, whether it’s a simple office strip or a complex mixed-use property, Novatae is here to help you place it with speed, accuracy, and underwriting insight. Reach out to learn how we can help you deliver more competitive quotes, better structures, and happier clients.
This article is not intended to be exhaustive, nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.