Imagine that you run a software company and lease your office space in a 50-floor office tower. On Wednesday morning you arrive at work just after 9am and are informed that a neighboring business located 3 floors above your floor suffered a major broken pipe overnight resulting in 2 feet of water being deposited across your entire office floor.

Explain whose insurance, the landlords, the insurance of the firm located 3 floors above or your firms insurance would cover your damages and losses experienced in this event. Specifically, what potential and actual losses will your business have as a result of the pipe breaking and the resulting flooding? For each loss, whose insurance, if in force, will cover the loss?

Data:

Condition of Premises, Repairs. The Lessee has examined the Demised Premises and accepts them in their present condition (except as otherwise expressly provided herein) and without any representations on the part of the Lessor or its agents, representatives, or attorneys, as to the present or future condition of the same. The Lessee shall take good care of the Demised Premises, and shall, at Lessee's own cost and expense, make all repairs and replacements of every nature, inside and outside, of the Demised Premises. The Lessee shall quit and surrender the Demised Premises at the end of the Lease Term in as good condition as the reasonable use thereof will permit, and shall not make any alterations, additions, or improvements to said premises without the prior written consent of the Lessor. Notwithstanding the foregoing, in no event shall Lessee be responsible to pay for any maintenance or improvements to the Demised Premises except those directly related to Lessees specific use and not those relating to general use of the building or Demised Premises.

Glass. The Lessee agrees to replace at the Lessee's expense any and all glass which may become broken in and on the Demised Premises. Glass shall be insured by the Lessee at its full insurable value in a company satisfactory to the Lessor. Said policy shall be of the full premium type and shall be deposited with the Lessor or its agent.

Liability of Lessor. Except to the extent caused by the negligence of Lessor, the Lessor shall not be responsible for the loss of or damage to property, or injury to persons, occurring in or about the Demised Premises, by reason of any existing or future condition, defect, matter of things in said Demised Premises, or the property of which the Demised Premises are a part, or for the acts, omissions or negligence of other persons or tenants in and about the said property. The Lessee agrees to indemnify and save the Lessor harmless from all claims and liability for losses of or damage to property, or injuries to persons occurring in or about the Demised Premises, including any environmental liability as defined in Paragraph ___ hereof. If Lessor is made party to any litigation instituted against Lessee, to which the foregoing indemnity may relate, Lessee will pay all expenses, costs, damages, judgments, and reasonable fees for counsel incurred by or imposed on Lessor in connection therewith, or as a result thereof.

Without limiting the foregoing and other indemnification provisions herein contained, Lessee agrees, at Lessee's sole cost and expense, throughout the term of this Lease, but for the mutual benefit of Lessor and Lessee, to maintain general public liability insurance against claims for bodily injury or death occurring upon or in the Demised Premises, such insurance to afford protection to the limit of not less than $______ in respect of bodily injury or death to any one person, and to the limit of not less than $______ in respect of any one accident, and in the amount of not less than $______ in respect of property damage.

All insurance provided for in this paragraph shall name Lessor (as owner) and Lessee as insureds, as their respective interest may appear, and shall be effected under valid and enforceable policies issued by insurers licensed to do business in the State of ______. Upon the commencement of the term of this Lease and thereafter not less than ten -(10) days prior to the expiration dates of the expiring policies theretofore furnished pursuant to this paragraph, originals of the policies or certificates thereof issued by the respective insurers shall be delivered by Lessee to Lessor. Not less than ten (10) days before the premium of each such policy shall become due and payable and the amount thereof shall have been determined, Lessee agrees to pay said premium, and to furnish Lessor, if requested, with evidence satisfactory to Lessor of such payment. All such polices shall, to the extent obtainable, contain an agreement by the insurers that such policies shall not be canceled without at least ten (10) days prior written notice to the Lessor.

9. Damage by Fire, Explosion, The Elements or Otherwise. In the event of the destruction of the Demised Premises or the building containing the said Demised Premises by fire, explosion, the elements, or otherwise during the term hereby created, or previous thereto, or such partial destruction thereof as to render the Demised Premises wholly untenantable or unfit for occupancy, or should the Demised Premises be so badly injured that the same cannot be repaired within ninety (90) days, from the happening of such injury, then and in such case the term hereby created shall cease and become null and void from the date of such damage or destruction, and the Lessee shall immediately surrender said Demised Premises and all the Lessee's interest therein to the Lessor, and shall pay rent only to the time of such surrender, in which event the Lessor may re-enter and repossess the Demised Premises thus discharged from this Lease and may remove all parties therefrom. Should the Demised Premises be rendered untenantable and unfit for occupancy, but yet be repairable within ninety (90) days from the happening of said injury, the Lessor may enter and repair the same with reasonable speed, and the rent shall not accrue after said injury or while repairs are being made, but shall recommence immediately after said repairs shall be completed. But if the Demised Premises shall be so slightly injured as not to be rendered untenantable and unfit for occupancy, then the Lessor agrees to repair the same with reasonable promptness and in that case the rent accrued and accruing shall not cease or determine. The Lessee shall immediately notify the Lessor in case of fire or other damage to the Demised Premises.

Insurance. Lessor hereby agrees to carry insurance with insurance companies licensed to do business in the State of ______ and satisfactory to Lessee for the following: (i) Commercial general liability coverage in the amount of not less than ______ for personal and bodily injuries to or death of one or more persons in any single occurrence; and (ii) Property damage liability in the amount of ______. Lessor shall deliver to Lessee certificates evidencing all insurance required under this Lease along with a waiver of subrogation in favor of Lessee prior to the effectiveness of this Lease. Such certificates shall evidence that such insurance shall name the (lessee) as additional insureds (with respect to general liability and property damage liability) and shall not be subject to cancellation or material modifications without thirty (30) days prior written notice to Lessee. Lessee's failure to request, review or comment on such certificates shall not affect Lessee's right or Lessors obligations hereunder.