Damage to Rented Premises

Overview

Damage to Rented Premises (also called "Fire Damage Legal Liability" or "Damage to Premises Rented to You") is a coverage provision within a Commercial General Liability (CGL) policy that provides a specific sublimit for property damage the insured causes to premises they rent or temporarily occupy. This coverage is an exception to the standard CGL exclusion for property in the insured's care, custody, or control.

How It Works

Under a standard CGL policy, there is a broad exclusion for damage to property the insured owns, rents, or occupies. Without an exception, a tenant who accidentally starts a fire that damages their leased space would have no CGL coverage for the landlord's property damage claim.

The Damage to Rented Premises provision carves out an exception to this exclusion. It provides coverage for property damage to the specific premises rented to or temporarily occupied by the insured, but only if the damage is caused by:

• Fire (under older ISO forms)
• Fire, lightning, or explosion (under current ISO forms, CG 00 01 04 13 and later)

The coverage has its own sublimit, shown on the ACORD 25 certificate in the General Liability section. Common sublimit amounts are:

• $50,000 (older or basic policies)
• $100,000 (standard)
• $300,000 (common contractual requirement)
• $500,000 or $1,000,000 (often required by commercial landlords)

This limit applies per premises, not per occurrence, meaning each rented location has its own separate limit.

Compliance Relevance

Damage to Rented Premises is a frequently reviewed coverage in commercial real estate COI compliance:

• Landlord requirements: Commercial leases almost universally require tenants to carry a minimum Damage to Rented Premises limit. The required amount varies — retail landlords may require $300,000, while Class A office buildings may require $1,000,000.
• Certificate verification: The limit appears on the ACORD 25 in the General Liability section. Compliance teams verify this amount against the lease requirement.
• Scope limitation: This coverage only applies to damage caused by fire, lightning, or explosion. Water damage, vandalism, or other perils are not covered under this provision. For broader protection, the landlord may require tenants to carry a separate property policy or renter's insurance.
• Endorsement expansion: Some insurers offer endorsements that broaden this coverage to include all perils, not just fire/lightning/explosion. This can satisfy landlords who want broader protection.

Example

A restaurant tenant accidentally starts a grease fire that causes $200,000 in damage to the leased space, including structural repairs and smoke remediation. The commercial lease requires a Damage to Rented Premises limit of at least $300,000. The tenant's CGL policy has a $300,000 sublimit for this coverage. The landlord files a claim against the tenant, and the tenant's insurer pays the $200,000 in property damage under the Damage to Rented Premises provision.