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Liability insurance of shopping centres leaseholders

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With the development of the retail trade market and expansion of the pool of lease offers for shopping floors in shopping centers and malls, the leaseholders feel the growing need to protect their business from emergencies and accidental costs. Of all risk management methods, insurance continues to be the most popular one.

Practically all shopping center leaseholders with significant turnover of commodities are looking to insure their property from numerous inherent risks. Even a minor failure or breakdown of equipment may turn against a leaseholder in the form of expenses on repairs and restitution of damages to nearby shop floors. It is only one scenario of events which may introduce its ‘undesirable corrections’ in the normal course of business.

Property and liability insurance with Ingosstrakh arms shopping center leaseholders with best tools to protect their investments and reputation, enables them to meet contracted insurance commitments and hedge themselves from financial losses through direct damages to own or loaned property or damages caused to third parties.

Property insurance

Insurable objects

• Cost of repair and interior furnishing
• Office equipment, furniture, office appliances.
• Stock of commodities
• Cash in safe and in hand
• Advertising installations
• Glass casing of shop windows
• An insurant may choose to insure the property both owned and loaned or managed etc.

Insurable risks:

• Insurance against fire and related risks (classic coverage):
• Fire, thunderbolt, gas explosion
• Natural disasters (flood, hurricane, rainfall, landslide, earthquake etc)
• Explosion of steam boilers, gas reservoirs, cars, machinery and similar mechanisms
• property damage by water from water supply, sewerage, heating and automatic fire-suppression  systems;
• theft with unauthorized access, robbery;
• intended malicious action of a third party.
• Collision with a road vehicle;
• Fall of a piloted aircraft
• Breaking of window glass, mirrors, shop windows
• In addition, the insurant may insure against the risk of property damage in an act of terrorism

Insured amount

The basis for calculation of the amount insurable for the property of a shopping center leaseholder is the present value of the property. An alternative is to calculate the insured amount on the basis of the book value of such property.

Terms of insurance

The cost of insurance may differ from the base tariff and depends on the construction materials and type of constructions and buildings, availability of fire safety systems and general property protection systems, size of the franchise and other factors. Please see the below table for indicative tariffs:

Insured amount, USD,	Insurance premium rate pa, %	Unconditional franchise, USD
Real estate or movables owned, loaned or controlled by the Insurant (buildings and constructions, interior furnishing; office equipment, furniture, tools and devices):
Up to 500.000	0,19%-0,45%	300-1.500
In excess of 500.000	On case by case basis	On case by case basis
Window glassing 1% No franchise External objects Cash in safe

The minimal insurance premium per property insurance policy is USD 100.

 

Business interruption insurance.

This type of insurance protects shopping center leaseholders from indirect losses incurred as the result of business interruption due to an insured event in property insurance during a certain period (indemnification period) which may be 3, 6, 9, 12 and 24 months.

Insurable objects

• Payroll
• Social charges
• Taxes and duties which are not linked to the company’s turnover
• Amortization
• Interest payable on bank loans
• Other expenses related to continued insurance
• Shortfall in collection of average profit per interruption period

Insurable risks

Material damages (damage or destruction of insured property) through actualization of any of the insured risks listed in the contract (natural disaster, fire, explosion etc) which causes interruption (or partial termination) of the company’s business, where the business can be resumed only after elimination of such material damages.

Liability insurance

By insuring property against all potential risks a shopping center leaseholder may nevertheless find itself in a situation where it would be liable to restitute the damages caused to the life or property of third parties, environmental damages etc. For example, a fire in a shopping center may damage nearby buildings or passers-by or a local park, and the guilty party will be liable to pay compensations to each third party to incur damages caused by such fire. Therefore, the damages incurred by a third party may become yours of you are found liable. The best protection for such instances is liability insurance.

• Third party liability insurance.Third parties include: other leaseholders, visitors, passers-by, other persons. The indemnity under such type of insurance is aimed to cover the damages caused in an insured event to property, health and life of third parties. An insured event is an event connected with the use of property, such use resulting in damages of third parties, i.e. as the result of a fire outbreak, failure or breakdown of equipment etc.
• Employer’s liability.This type of insurance enables companies to restitute the damages caused to your employees during their employment, including medical expenses, healthcare costs, dismissal and income lost through disablement (temporary or permanent, partial or full).
• Insurance for the period of repair, equipping and interior finishing of leased shop floors.To protect the interest of shop floor owners and to meet the terms and conditions of lease agreements, the leaseholder may choose to enter a civil liability insurance contract against losses/damages caused to third parties (including leaser, other leaseholders and visitors) at any time during the period of repairs, finishing etc of the leased shop floors. The limit of liability shall be sufficient to cover the damages dependent on the scope and character of repairs, finishing etc.