After disputes over rent, insurance is the next most common flashpoint between commercial landlords and tenants under the AIR CRE lease. And it’s rarely because the lease is unclear — it’s because the requirements get treated as boilerplate until the moment they actually matter: a slip-and-fall, a fire, a lawsuit naming both lessee and lessor.

This guide walks through what the AIR CRE lease actually requires of a lessee’s insurance, why one specific endorsement matters more than people realize, and the two tools a lessor has when a tenant falls short.

Want to hear the full breakdown?

In our 30-minute deep-dive below, we explain these provisions and answer practical questions from commercial real estate professionals.

1. General Liability Insurance & the Additional Insured Endorsement (¶8.2(A))

Paragraph 8.2(A) of the AIR CRE lease sets out the lessee’s core insurance obligation: a commercial general liability policy protecting both lessee and lessor as an additional insured, covering claims for bodily injury, personal injury, and property damage arising from use of the premises. The required limits are $1 million per occurrence with a $2 million annual aggregate.

It’s worth understanding why this requirement exists. Paragraph 8.7 of the lease already obligates the lessee to indemnify the lessor for claims arising from its use of the premises — but an indemnity obligation is only as good as the tenant’s ability to pay it. The insurance requirement is what actually backs that promise. Think of it the way you’d think of a security deposit: it’s the mechanism that makes the underlying obligation real.

That’s also why the additional insured requirement matters so much. The lease requires an endorsement “at least as broad as the Insurance Service Organization’s Additional Insured — Managers or Lessors of Premises endorsement.” In a real scenario — say, someone slips and falls in a leased warehouse and sues both the tenant and the landlord — a properly executed additional insured endorsement means the insurance company will not only indemnify the lessor for damages, but will hire counsel and defend the lessor in the suit.

Here’s the part that catches even experienced landlords off guard: a certificate of insurance, on its own, is not sufficient. A certificate is typically completed by the tenant’s insurance broker, not the insurance company itself — and broker practices vary widely. The certificate is not a binding agreement. If you’re accepting a certificate as evidence of coverage, you should require the actual endorsement (titled “Additional Insured — Managers or Lessors of Premises”) to be attached to it.

2. Other Required Insurance Coverage (¶8.4)

Beyond general liability, the lease requires three additional coverages under paragraph 8.4:

• Property damage insurance (8.4(A)) — covering the lessee’s personal property, trade fixtures, and lessee-owned alterations and utility installations.
• Business interruption insurance (8.4(B)) — coverage that drew renewed attention during COVID, when many tenants learned firsthand how limited this type of policy can be.
• Workers’ compensation insurance (8.4(C)) — standard coverage for the tenant’s employees working at the premises.

Lessees are required to provide evidence of all three, the same as with the general liability policy.

3. Lessor Enforcement Right #1: Automatic Rent Increase (¶8.9)

If a lessee fails to maintain the required insurance — or fails to provide evidence of insurance it actually has — paragraph 8.9 gives the lessor an automatic remedy: the base rent increases, without any notice requirement, by 10% of the then-existing base rent or $100, whichever is greater, for any month or partial month the deficiency continues.

Notably, this applies in two distinct scenarios: when the tenant genuinely lacks the required coverage, and when the tenant has the coverage in place but simply hasn’t delivered the certificates or binders proving it. Either way, the rent increase is automatic and doesn’t require the lessor to send notice first.

4. Lessor Enforcement Right #2: Termination (¶13.1(B) & ¶13.2)

The more serious remedy lives in the lease’s default and breach provisions. Under ¶13.1(B), a lessee is in breach if it fails to provide reasonable evidence of insurance and that failure continues for three business days following written notice. If the deficiency isn’t cured in that window, the lessor gains the remedies available under ¶13.2 — including the right to terminate the lessee’s right to possession.

Three business days is a short cure period. It’s worth noting that it’s the same window the lease gives for nonpayment of rent — while most other lessee defaults allow substantially longer to cure. That’s a deliberate signal of how seriously the AIR CRE lease treats an insurance deficiency.

In practice, termination over an insurance issue is a real but more technical basis for eviction than nonpayment of rent, and courts are generally more familiar with the latter. Lessors who take this route are on stronger footing when their communications with the tenant clearly and consistently document why the insurance requirement matters — rather than relying on a technical notice with no context. If it ends up in front of a judge, that documentation is what separates “the landlord was thorough” from “the tenant says they had no idea this was serious.”

The Takeaway

The AIR CRE lease doesn’t leave insurance compliance to interpretation — it specifies the coverage, the endorsement, and exactly what happens when a lessee falls short. The most common point of failure isn’t a missing policy; it’s an incomplete certificate standing in for the endorsement that actually protects the lessor. That single distinction is worth building into your standard intake process for every new tenant.

Disclaimer

This article is for educational and discussion purposes only and does not constitute legal or insurance advice. Every lease, insurance policy, and factual situation is different. Consult qualified legal counsel and your insurance professional regarding your specific circumstances.

Consensus Legal is not affiliated with or sponsored by AIR CRE.