And Why It Matters for Your Business

If you have signed — or are about to sign — a commercial lease for industrial space in Orange County, you have almost certainly seen a requirement that you, as the Lessee (tenant), carry Commercial General Liability insurance, commonly referred to as CGL. It appears as a standard provision in the AIR CRE lease forms widely used throughout California. But what exactly is CGL insurance, why does your Lessor (landlord) require it, and how does it differ from other types of coverage your business may already carry?

At Trico Realty, we believe in keeping things straightforward. We have been helping businesses find a home in Orange County’s industrial market since 1968, and over that time we have seen what happens when insurance requirements are misunderstood or overlooked. This post is our plain-language guide to CGL insurance for tenants — what it covers, why you need it, and how it fits into the bigger picture.

Quick Checklist (Before You Move In)

If you’re short on time, here are the seven things every tenant needs to know:

• Your lease requires CGL insurance — at minimum $1,000,000 per occurrence and $2,000,000 annual aggregate. (Throughout this post: Landlord = Lessor; Tenant = Lessee.)
• The Lessor’s policy covers the building. Your CGL policy covers your business operations, visitors, and incidents inside your leased space.
• Your policy must name the Lessor and Trico Realty, Inc. as Additional Insured (endorsement required). COI alone is not enough.
• Your coverage must be primary — your insurer responds first. The landlord’s policy covers the rest after your limits are used.
• Two endorsements are required: Additional Insured — CG 20 11 (any edition or equally broad) and Cancellation Notice — IL T4 05 05 19 (or equivalent).
• If the Lessee’s coverage lapses, base rent automatically increases by 10% or $100 (whichever is greater) — with no notice required.
• CGL is separate from Workers’ Comp, auto, umbrella, and E&O coverage — each protects a different risk.

Continue reading below for the full plain-language breakdown of every AIR lease insurance requirement, what each endorsement means, and how to make sure your submission is complete.

What Is Commercial General Liability Insurance?

Commercial General Liability insurance is a broad coverage policy designed to protect a business against claims arising from bodily injury, property damage, personal injury, and advertising injury that occur as a result of your business operations, your products, or your completed work.

In the context of an industrial lease, CGL insurance protects against situations such as:

• A delivery driver slipping and falling on your loading dock
• A customer or vendor being injured while visiting your premises
• Damage caused by your operations to an adjoining tenant’s space
• Property damage resulting from a fire or water incident that originated in your suite

CGL policies are structured with per-occurrence limits — the maximum paid for any single incident — and aggregate limits, the maximum paid during the entire policy period, typically one year. Most commercial leases, including AIR CRE forms, specify minimums of one million dollars per occurrence and two million dollars aggregate, though requirements can vary based on the property, the use, and the landlord.

What the AIR CRE Lease Requires

The AIR CRE Standard Industrial/Commercial Lease, the form most commonly used for industrial leases throughout California including those used by Trico Realty, is specific about what Lessees must carry. Understanding the intent behind each provision helps you make sure your policy is structured correctly before you move in.

Liability Insurance — Tenant’s Obligation

The lease requires Lessees to obtain and maintain a CGL policy that protects both the Lessee and the Lessor against claims for bodily injury, personal injury, and property damage arising from the use, ownership, occupancy, or maintenance of the leased premises and surrounding areas.

Several specific requirements go beyond simply holding a policy:

• Coverage must be on an occurrence basis — not claims-made — with minimum limits of one million dollars per occurrence and two million dollars annual aggregate.
• The Lessor — Trico Realty, Inc. — must be added as an additional insured by endorsement, not merely listed as a certificate holder. The required endorsement form is the ISO Additional Insured — Managers and Lessors of Premises endorsement or one that is at least as broad.
• The policy must include coverage for liability assumed under the lease itself, meaning the indemnity obligations the tenant takes on in the lease must be backed by the policy as an insured contract.
• The Lessee’s coverage must be primary and non-contributory, meaning the Lessee’s insurer responds first in the event of a claim. The Lessor’s insurance is treated as excess only and is not called upon unless the Lessee’s limits are exhausted.

Why this matters: If Trico is named as an additional insured and your policy is primary, your insurer is expected to defend Trico if a claim arises from your operations — even before any determination of fault. Without this structure, legal defense costs could fall on the property owner for an incident that had nothing to do with how we managed the building.

Liability Insurance — Landlord’s Obligation

The lease also requires the Lessor to carry its own CGL coverage — separate from, and not a substitute for, the Lessee’s policy. See ‘Lessor Insurance vs. Lessee Insurance’ below.

The Lessor is responsible for insuring the building itself — the structure, roof, systems, and common areas — to its full replacement cost. However, anything the Lessee owns or installs is explicitly excluded from the Lessor’s coverage. Lessee-owned alterations, utility installations, trade fixtures, and personal property are the Lessee’s responsibility to insure. The Lessor insures the building. The Lessee insures everything inside their space that belongs to them.

Tenant’s Property, Business Interruption, and Workers’ Compensation

Beyond CGL, the lease separately requires Lessees to carry three additional coverages:

Property coverage:  All of the Lessee’s personal property, trade fixtures, and Lessee-installed improvements must be insured at full replacement cost, with a deductible not to exceed one thousand dollars per occurrence.

Business interruption insurance:  Lessees must carry loss-of-income coverage sufficient to reimburse the business for lost earnings if operations are interrupted due to a covered peril or loss of access to the premises.

Workers’ Compensation:  California law requires virtually all employers to carry Workers’ Compensation coverage, and the lease reinforces this obligation. The policy must include a Waiver of Subrogation endorsement in favor of the Lessor, and a copy must be provided along with the certificate of insurance.

Policy Quality and Certificate Requirements

The lease specifies that all required insurance must be placed with carriers that hold a financial strength rating of at least A-, VII from AM Best — one of the most widely used independent insurance rating organizations. Policies with lower-rated carriers do not satisfy the lease requirement.

Tenants are required to deliver certificates of insurance with copies of all required endorsements to the landlord before occupancy begins, and again at each renewal. Policies must provide at least thirty days’ prior written notice to the landlord before cancellation or material modification, and tenants must furnish renewal evidence at least ten days before a policy expires.

Waiver of Subrogation

Both the Lessee and the Lessor agree to waive their right to recover property damage losses from each other — and to require their respective insurers to do the same. In practical terms, this means that if a covered property loss occurs, the insurance companies settle the claim without turning it into litigation between the Lessor and the Lessee. It is a mutual protection that keeps the relationship clean and avoids costly disputes over damages that insurance is already paying.

Indemnity

The lease includes a broad indemnity provision under which the Lessee agrees to defend, protect, and hold harmless the Lessor and its agents from claims arising out of a breach of the lease or from the Lessee’s use and occupancy of the premises. The only exception is for losses caused by the Lessor’s own gross negligence or willful misconduct.

This is the provision that makes your CGL policy so important. The policy’s insured contract coverage is specifically designed to back up your indemnity obligations — so that if a claim arises from your operations, your insurer steps in to defend and indemnify without requiring you to fund that defense out of pocket.

What Happens If Coverage Lapses

The lease addresses this directly and the consequences are significant. If a Lessee fails to maintain the required insurance or fails to provide current certificates, the base rent increases automatically — without any notice required — by ten percent of the then-current base rent or one hundred dollars, whichever is greater. This increase applies for every month or partial month the coverage gap exists.

This is not a discretionary penalty that needs to be assessed. It takes effect the moment coverage lapses. Maintaining current certificates and renewing policies on time is not optional — it is a financial obligation built into the lease itself.

Lessor Insurance vs. Lessee Insurance

The Lessor’s insurance covers the building — the structure, roof, common areas, and systems — and our own liability for incidents within our direct responsibility. It does not cover the Lessee’s business operations, visitor injuries inside the leased space, damage caused by the Lessee’s employees or equipment, or any claim brought against the Lessee.  The Lessor insures the building to full replacement cost. Anything the Lessee owns, installs, or brings into the space — trade fixtures, improvements, equipment, inventory — is explicitly excluded from the Lessor’s coverage and is the Lessee’s responsibility to insure separately.

Why the Landlord Requires Tenants to Carry CGL

Requiring Lessees to carry their own coverage is how liability is properly allocated when multiple parties share a property. With the additional insured endorsement and primary coverage requirement in place, the right insurer responds to the right claim — and the Lessor is protected from being pulled into litigation over incidents that had nothing to do with building ownership.

In 55 plus years of managing industrial properties in Orange County, we have seen what happens when coverage is in place and when it is not. Getting it right from the start protects the Lessee, protects the Lessor, and keeps a business relationship from turning into a legal dispute. It keeps things fair, efficient, and drama-free for everyone involved.

How CGL Differs from Other Types of Insurance

CGL is one of several types of commercial insurance your business may need. Understanding how they differ helps you make sure you are fully covered — and helps you avoid assuming your CGL policy covers risks that require a different policy entirely.

Commercial General Liability

The core policy required by your lease. It covers bodily injury, property damage, and personal and advertising injury arising from your business premises and operations. This is your primary protection against third-party claims on your leased property.

Commercial Automobile Insurance

Covers vehicles owned by or used on behalf of your business — delivery trucks, company cars, and forklifts or other motorized equipment operated on public roads. If a driver causes an accident while making a delivery, your CGL policy will not respond. Commercial auto coverage will. Any business that operates vehicles of any kind needs a separate commercial auto policy.

Garage Liability Insurance

A specialized form of liability coverage for businesses that work on, store, or move vehicles belonging to their customers — auto repair shops, dealerships, and parking facilities are the most common examples. Standard CGL policies typically exclude coverage for claims arising from working on customer-owned vehicles. If your industrial operation involves servicing vehicles owned by others, garage liability is an essential separate coverage.

Umbrella Insurance

An umbrella or excess liability policy provides additional coverage limits above your underlying policies — typically your CGL, commercial auto, and employer’s liability. When underlying limits are exhausted, the umbrella steps in. Some Lessors require umbrella coverage for Lessees with higher-risk operations, and some Lessees find that their CGL carrier’s maximum available limits fall short of what the lease requires. An umbrella policy can bridge that gap at a relatively modest cost.

Errors and Omissions Insurance

Also called Professional Liability insurance, E&O covers claims arising from mistakes, negligence, or failure to perform professional services. If your business provides consulting, engineering, design, architecture, or any form of professional advice, E&O protects you when a client claims that your work caused them financial harm. This is an entirely separate exposure from premises liability and is not covered under a standard CGL policy.

Workers’ Compensation Insurance

Workers’ Comp is not a liability policy. It is a no-fault benefit system that provides medical treatment and wage replacement to employees injured on the job, regardless of who was at fault. California law requires virtually all employers to carry it. It covers your employees. Your CGL policy covers third parties — visitors, customers, vendors — who are harmed by your business. The two coverages are entirely separate and neither substitutes for the other.

Quick Reference: Insurance Types at a Glance

Insurance Type	Who It Protects	What It Covers
Commercial General Liability	Third parties — visitors, vendors, customers	Bodily injury and property damage arising from your premises and operations
Commercial Auto Insurance	Your business and third parties in auto incidents	Accidents involving business-owned or operated vehicles
Garage Liability	Your business and vehicle owners	Claims from servicing, storing, or moving customer vehicles
Umbrella / Excess Liability	Your business	Additional limits above your CGL, auto, and employer’s liability policies
Errors & Omissions (E&O)	Your business	Claims from professional mistakes, negligence, or failure to perform services
Workers’ Compensation	Your employees	On-the-job injuries; required by California law for all employers

What Endorsements to Ask Your Broker For

Holding a CGL policy is only part of the requirement. The lease also specifies the endorsements that must be attached to that policy — and those endorsements are what actually extend protection to Trico Realty. When your broker delivers your certificate of insurance, make sure two specific endorsements are included. Without them, your submission will not be considered complete regardless of how strong your coverage limits are.

Endorsement 1: Additional Insured — Managers or Lessors of Premises (CG 20 11)

This is the ISO standard endorsement form (form number CG 20 11) that formally adds the Lessor to the Lessee’s CGL policy as an additional insured. It is the specific form referenced in the AIR CRE lease, and it is the only endorsement form — or one equally as broad — that satisfies the lease requirement. A general certificate of insurance listing Trico as a certificate holder is not sufficient; the endorsement itself must be provided.

The endorsement schedule must show:

• Designation of Premises: the full address of your leased space
• Name of Additional Insured: the property lessor and Trico Realty, Inc.
• Additional Premium: Included (confirming no separate charge is breaking the endorsement)

The endorsement limits the additional insured coverage to liability arising specifically from the ownership, maintenance, or use of the leased premises — not from the Lessor’s own unrelated operations. It also makes clear that the coverage does not apply to any occurrence that takes place after the tenancy ends, and that it will not increase the overall policy limits shown in the declarations. These are standard, reasonable limitations that your broker will be familiar with.

One detail worth noting: when coverage is required by a contract, the endorsement caps what the additional insured receives at either the amount required by the contract or the limits shown in the policy declarations — whichever is less. This is why meeting the minimum coverage requirements in the lease matters: if your policy limits fall below what the lease requires, the endorsement coverage follows the lower number.

Endorsement 2: Designated Person or Organization — Notice of Cancellation (IL T4 05 or equivalent)

The second endorsement ensures that if your insurer cancels or non-renews your policy for any reason other than nonpayment of premium, Trico Realty receives direct written notice before the cancellation takes effect. This is a separate and distinct protection from the lease’s cancellation notice requirements — it obligates the insurance company directly, not just the Lessee.

The endorsement schedule must show:

• Number of Days Notice: 10 days minimum (matching the lease requirement for renewal notice)
• Person or Organization: the property lessor and Trico Realty, Inc.
• Address: 3100 Pullman Street, Unit A, Costa Mesa, CA 92626

This endorsement covers cancellation initiated by the insurer. It does not apply to cancellations for nonpayment of premium — which means the most common reason policies lapse unexpectedly is also the one scenario where this notice protection does not apply. The practical takeaway: set calendar reminders for your premium due dates. A policy cancelled for nonpayment can trigger the automatic rent increase in Paragraph 8.9 with no advance warning to anyone.

A note on form numbers: The exact form numbers shown above (CG 20 11 04 13 and IL T4 05 05 19) are carrier-specific edition dates. Your insurer may use a different edition year or a proprietary equivalent form. What matters is the substance — that the endorsement names Trico Realty, Inc. as an additional insured on your premises, and that it obligates your carrier to provide direct cancellation notice to Trico at the correct address. Ask your broker to confirm that whatever forms they use satisfy both requirements.

Trico Realty provides tenants with sample copies of both endorsement forms so you know exactly what your broker needs to produce. If you are unsure whether your current endorsements meet the requirement, contact us before your next renewal and we will walk through it with you. Getting this right protects everyone — and it is a lot easier to fix before a claim than after one.

Send this to your broker:

• Limits: $1M per occurrence / $2M annual aggregate
• Additional Insured endorsement: CG 20 11 (any edition or equally broad)
• Primary & non-contributory
• Cancellation notice endorsement: IL T4 05 05 19 (or equivalent), 10 days minimum
• Workers’ Comp Waiver of Subrogation endorsement

► Download the Tenant Insurance Submission Checklist (PDF) at tricorealty.com/news

Our Advice: Work with a Qualified Commercial Insurance Broker

The insurance requirements in the lease are contractual obligations, not suggestions. Carrying a policy that does not meet the exact specifications — or failing to provide the required endorsements and certificates — can constitute a default under your lease and trigger automatic financial consequences.

Before you sign a lease or take occupancy, bring the insurance section to a licensed commercial insurance broker who is familiar with California CRE requirements. Walk through each provision together. Make sure the policy has the right limits, the right endorsements, and that both the Lessor and Trico Realty, Inc. are properly named as additional insureds. Then set a calendar reminder to verify renewal before each policy expiration.

At Trico, we are here to help you find the right space and set you up for long-term success. The relationship does not end when the ink is dry — that is where it starts. If you have questions about what your lease requires, reach out to us directly.

Trico Realty, Inc.

3100 Pullman St., Suite A  |  Costa Mesa, CA 92626

714.751.4420  |  www.tricorealty.com

DRE #00342120

This post is for informational purposes only and does not constitute legal or insurance advice. Please consult a licensed insurance broker and legal counsel for guidance specific to your situation.