Posted on May 19, 2014
Hawaii business property owners often obtain certificates of insurance from their tenants in order to provide themselves with added protection from loss or damage risk. Tenants leasing business premises simply request that their insurance carrier provide certificates of insurance to the landlord to show they are insured. Up until 2009 whenever a business tenant's policy lapsed or was cancelled, the insurance company was required to provide notice to certificate holders. This requirement was contained with the standard certificate of insurance form so that certificate holders could protect themselves if a policy was cancelled.
Effective September 2009, the form used by insurance companies to notify certificate of insurance holders, the ACORD 25 form, was modified and omitted the cancellation provision. It wasn't until the end of 2010 when the State of Hawaii began using the new ACORD 25 forms, which in essence waived the notification requirements for new and existing commercial insurance policies. So beginning with 2011, more and more insurers begin using the newer form.
Hawaii business property owners will subsequently have no advance notice when a tenant's commercial insurance coverage is cancelled so their ability to monitor financial stability is no longer available. Some insurance companies have altered their business insurance policies by endorsement to include provisions for notification of cancellation; however, not every carrier has followed suit.
Now, business property owners and managers must review tenant business insurance policies to discover whether this notification endorsement exists. They will now need to be more vigilant when it comes to making sure their tenants are in good standing with their insurance coverage.
The State of Hawaii now requires all of departments to place within their contracts that any contractors working for state departments provide immediate notice to the department when a certificate of insurance is cancelled or not renewed.
Many property owners can protect themselves taking steps to include such language in their lease contacts as well. In addition, monitoring tenant insurance policies is another means to make sure that they are protected should a tenant policy be cancelled.