My policyholder has lessors' risk CGL. One of their tenants is negotiating to terminate their lease early. The insured is going to enter a lease termination agreement with their tenant. In that agreement, they are going to cap any liability against the tenant (contract, tort, or otherwise) at $75,000. They wish to know if that runs contrary to the coverage provided in the CGL under an "insured contract". Please advise.
Illinois Subscriber
Even though the insured might cap the liability to $75,000 in the contract, that would have no bearing on the coverage provided under the CGL for the insured's liability under contract. Therefore, the insurance and defense coverage available under the CGL would remain at the same liability limits as are shown in the Declarations per occurrence and aggregate for bodily injury or property damage arising out of liability the insured assumes in the contract.
For example, the insured contract coverage under the CGL will provide for bodily injury and property damage, including attorney fees and defense as required by the contract for other than the insured, including an indemnitee in a suit for which the insured has assumed liability in the contract. There is no limitation for the amount of this coverage except the limit of liability in the Declarations, which could well exceed the $75,000.
It is possible that the named insured would be pulled into a suit for negligence of the tenant but without amendment of the limits of liability of the CGL with respect to the contract, the liability would not be capped. The insured will need to be careful here also, as they would not want to limit their premises liability except with respect to liability assumed under this contract.
Since the insured is trying to limit liability by a separate contract, we would suggest that they have the attorney drafting the contract review the insurance policy as well so that the insured is aware of the legal issues possibly involved.