I received the following recent email query:

“I have a situation where mywould-be-insured is needing, because the lease states it, firelegal liability $1,000,000 and the policy we have been offered by acarrier states, “Damages To Premises Rented To You” is only$100,000. The offering I received from the carrier is for CGL “CP00 90.” Could you please shine some light in this?”

“Fire legal liability” is an outdated term that far too manystill use, even though the standard liability policies dropped theterm in the early 1980s. As that was more than 30 years ago, youwould think that whomever drafted the lease would be moreup-to-date.

Leases are legal documents creating serious duties,responsibilities, and obligations, not fond recollections of thepast.

More egregious, this type of “well, that may not be the latestand greatest terminology, but you know what we meant” preparationof what is supposed to be a legally precise document cannot helpbut lead us to wonder what other slipshod errors, from minor topotentially disastrous, lie in wait. Beyond the real danger is asimple bit of borderline fraud: Some unsuspecting client likely gotbilled for this lazy “cut and paste” as if it were real legalexpertise.

Do everyone a favor, contract drafters, and follow a simplethree-step formula:

1. Decide exactly what protection you want to gain from thecontract.

2. Determine the current precise correct term for that protection.If no such term exists, revisit Step 1.

3. Write the contract, using the terms determined in Step 2.

Diving into policy language

Now let's raise clarity for the query. Note: I'm assuming thereare two carriers: the first offering a commercial generalliabilityand the second referring to the CP 00 90.

The first is on the right track with “Damages To Premises Rentedto You” as that is today's Insurance Services Office coverage formsequivalent to the old “Fire Legal.” One potential point ofconfusion arises when those turning to the actual form — CG 00 01 04 13 — find there is no specificcoverage so named in the insuring agreement — it is created by thefollowing exception to the ISO CGL's CG 00 01 04 13 Coverage Aexclusions:

“Exclusions c. through n. do notapply to damage by fire to premises while rented to you ortemporarily occupied by you with permission of the owner. Aseparate limit of insurance applies to this coverage as describedin Section III – Limits of Insurance.”

It is only in the Declarations and in Section III that we findthe coverage created by this exception is subject to a specificseparate limit titled “Damage to Premises Rented to You.”

If we assume that the lease drafter got the name wrong but thecoverage right, this means the landlord, reasonably or not, wants a$1 million limit for “Damage to Premises Rented to You.” So for thetenant to fully comply, the first carrier either needs to raisethat $100,000 limit to the $1 million or provide a combination ofunderlying commercial general liability with an additional amountin an excess/umbrella policy that totals the full requirement.

As to the second carrier, the reference to CGL “CP 00 90” isconfusing at best. My take is that intertwining liability withcommercial property in addressing a demand for “fire legal” refersto providing any coverage limit required beyond what they arewilling to include in the CGL via the commercial property programrather than an excess/umbrella policy.

Amazing how either simple ignorance or a lack of effort can turna basically rational idea — that a tenant should be insured for anydamage caused to the landlord's property due to the tenant'snegligence — into an overcomplicated and misunderstoodterminology. 

Chris Amrhein, AAI, is an insurance educator and speaker,and serves as the chief fun officer at insuranceisfun.com.

Related: Do you know the ISO Commercial General LiabilityForm as well as you think?