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3. CP-12-19

Form CP 12 19: Additional Insured - Building Owner

The CP 12 19 Additional Insured - Building Owner endorsement is a crucial component of a Commercial Property policy. It is used to extend coverage under a tenant's property policy to include the owner of the building that the tenant occupies. Essentially, this form designates the building owner as a "Named Insured," but this status is strictly limited to direct physical loss or damage to the specific building(s) listed in the endorsement's schedule. This is typically utilized when the lease agreement obligates the tenant to provide insurance coverage for the building itself, rather than just their own business personal property or improvements and betterments.

Classes of Business and Applications

This endorsement is widely applicable across various commercial sectors where tenants lease property and assume responsibility for insuring the structure. Common scenarios include:

• Triple Net Leases (NNN): This is a primary situation where the CP 12 19 is used. In a triple net lease, the tenant is typically responsible for property taxes, insurance, and maintenance, including insuring the building structure. Real-world example: A company leasing an entire warehouse under a NNN lease would use the CP 12 19 to add the property owner to their policy for building coverage.
• Single-Tenant Occupancies: Often seen with standalone retail locations, restaurants, or industrial buildings where one tenant occupies the entire premises and the lease dictates they insure the building.
• Leases Requiring Tenant to Insure Building: Regardless of the lease type name, if the contractual agreement explicitly requires the tenant to secure building insurance, this endorsement is appropriate to protect the owner's interest.
• Significant Tenant Improvements that Become Part of the Building: In cases where a tenant invests heavily in improvements that are considered part of the building and cannot be removed, the owner may require this endorsement to ensure their interest in these enhanced values is protected under the tenant's policy.

Special Considerations

Several important factors must be considered when utilizing the CP 12 19:

• Lease Agreement Paramount: The lease agreement is the foundational document. It must clearly establish the tenant's obligation to insure the building, thereby creating an insurable interest for the tenant in the building. Without this contractual obligation, the tenant may lack the necessary insurable interest.
• Scope of Coverage: The building owner's coverage under this endorsement is strictly limited to direct physical loss or damage to the building(s) described in the schedule. It does not extend to the owner's other property, liability, or loss of rental income (which would require separate endorsements like the CP 15 03 Business Income - Landlord as Additional Insured (Rental Value)).
• Named Insured Status for Building Only: While the title is "Additional Insured," the form's text confers "Named Insured" status upon the building owner, but solely for the scheduled building coverage. This is a critical distinction from being a general named insured on the entire policy.
• No Automatic Notice of Cancellation: Unlike some other interest-holder endorsements (e.g., mortgagee clauses), the CP 12 19 does not typically grant the building owner an automatic right to receive notice of policy cancellation from the insurer. This should be addressed contractually in the lease or through other means if required by the owner.
• Accurate Scheduling: The endorsement requires precise information: the correct legal name and address of the building owner, and an accurate description of the premises and the specific building(s) being covered. Errors can lead to coverage disputes.
• Real-world example: A tenant has a CP 12 19 on their policy. If the building suffers a covered fire loss, both the tenant and the building owner (as a named insured for the building) would have their interests considered in the claim adjustment for the building damage. However, if the tenant's operations cause a liability claim, this endorsement would not provide liability protection to the building owner.

Key Information for Agents and Underwriters

• Risk Assessment:
  • Thoroughly review the lease agreement to confirm the tenant's responsibility to insure the building and the extent of that obligation.
  • Assess the building's characteristics (construction, age, occupancy, protection features, and valuation) as these directly impact the risk being underwritten, even on the tenant's policy.
• Coverage Adequacy and Gaps:
  • Ensure the building coverage limit is sufficient to meet the requirements of the lease, cover the actual replacement cost or agreed value of the building, and satisfy any coinsurance provisions.
  • Advise clients that CP 12 19 does not cover the building owner's potential loss of rental income or their general liability. These exposures require separate consideration (e.g., CP 15 03 for rental income).
• Pricing: The premium associated with the building coverage will be influenced by its specific underwriting characteristics and will form part of the tenant's total policy cost.
• Underwriting Guidelines:
  • Verify the named insured on the policy is the tenant.
  • Confirm the full legal name of the building owner being added.
  • The specific building(s) must be clearly identified and scheduled on the endorsement.
  • Be aware that adding a building owner as a full Named Insured on the tenant's entire policy can create unintended coverage extensions. The CP 12 19 mitigates this by limiting the owner's status to the building coverage only.
• Real-world example for Agents: An agent placing coverage for a tenant required to insure the building should explain that while the CP 12 19 addresses the physical damage to the building for the owner, the owner might also require evidence of the tenant's General Liability coverage naming them as an additional insured (e.g., via a CG 20 11 or similar endorsement) to protect against liability arising from the tenant's operations on the premises.