Insurance is one of the most legitimate operating expenses a landlord passes through to tenants. It's also one of the most abused. Rising premiums and complex policy structures have turned insurance CAM billing into a place where overcharges hide easily, some accidental, some not.
I built CAMAudit Rule 9 for this category specifically. This is the deep-dive pattern library behind it. Start with the four-step review in how to review tax and insurance pass-throughs, then come back here when a line item needs a closer look.
What insurance is typically included in CAM
Most commercial leases let a landlord pass through premiums for a defined set of policies that protect the property.
- Commercial property insurance. Coverage for the building structure, common areas, and landlord-owned improvements. This is the core policy most tenants expect to share.
- Commercial general liability insurance. Coverage for injury and property claims in common areas, a slip-and-fall in the parking lot, a maintenance worker's accident on site. Since the common areas are shared, this exposure is shared too.
- Umbrella or excess liability. Coverage that sits above the general liability policy for higher limits. Reasonable umbrella coverage is usually passable. Unusually high limits relative to the property's risk profile are worth questioning.
- Property damage and loss of rents. Some leases allow a loss-of-rents rider. Look closely at this one. Loss-of-rents coverage protects the landlord's revenue, not the tenant's. Whether it's passable depends entirely on the lease language.
What should not be passed through
This is where the overcharges live. A few categories of insurance expense belong to the landlord, not the tenant, and shouldn't appear on a CAM bill at all.
- Directors and officers (D&O) liability. Covers the personal liability of the management company's or landlord's officers. It has nothing to do with property operations. Passing it to tenants is an overcharge by any standard.
- Workers' compensation for landlord employees. If the landlord or management company employs on-site staff, their workers' comp coverage is an employment cost, not a property cost.
- Employment practices liability insurance (EPLI). Covers wrongful termination, discrimination, and harassment claims against the landlord's employees. Same category as D&O: this protects the landlord's business, not the property.
- Coverage for other properties. If a landlord insures a portfolio under one blanket policy, only the share attributable to this property should get passed through. Billing the full blanket premium, or more than a proportional share, is an overcharge.
- Flood and earthquake riders for excluded perils. If a lease specifically excludes these perils and the policy includes riders for them, the tenant shouldn't be paying a proportional share of those riders.
"Insurance is the category where the line items look the most legitimate, because they come from real invoices from real insurers. But a policy that covers 12 properties getting billed 100% to one building, or a D&O premium tucked into the general liability line, won't announce itself. You have to ask for the declarations page." - Angel Campa, Founder of CAMAudit
The policy structure problem
A client usually gets one insurance line item on the reconciliation, something like "property and liability insurance: $47,200." What's behind that number can be a multi-policy package mixing legitimate CAM costs with non-passable items.
Landlords rarely break out the premium components unless asked. The declarations page for each policy shows exactly what's covered, what the premium is, and which properties or entities it covers.
Most audit rights clauses give tenants the right to request declarations pages and premium allocations for every policy in the CAM bill. Request the declarations page before concluding a large line item is fine as billed.
Blanket policies and allocation errors
Portfolio landlords often insure multiple properties under one blanket policy. That's legitimate. Insurers give better pricing for portfolio coverage. The problem shows up when the allocation to a specific property doesn't match that property's share of the overall risk.
Say a blanket policy covers 10 properties for a $2.5 million total premium. A flat allocation gives each property 10%, or $250,000. But properties differ in value, size, occupancy, and claims history. The insurer's pricing already accounts for that. The landlord's allocation to individual buildings may or may not follow the same logic.
If the landlord allocates by square footage but the policy was priced mainly on building value, the correlation might hold up or it might not, depending on the portfolio. Ask for the allocation methodology in writing. Compare a property's share to its percentage of total portfolio square footage or value. A material gap is worth disputing.
The lease language that limits a client's exposure
Insurance provisions usually sit in the CAM exhibit or a dedicated insurance clause. A few protections are worth checking for.
- "Reasonable and customary" standard. Some leases limit insurance pass-throughs to premiums that are reasonable for comparable properties in the same market. It's a vague standard, but it gives grounds to challenge a premium well above market comparables.
- Per-square-foot caps. Some leases cap insurance pass-throughs at a dollar amount per rentable square foot. If the cap is $2.50 per square foot and the bill is $3.80, the excess is an overcharge.
- Coverage type definitions. Leases that list which insurance types are passable give the clearest protection. If the list says "property and general liability" and the bill also includes workers' comp and D&O, the excess is a clear violation.
- Base year limitations. If a lease uses a base year structure, the tenant only owes increases above the base year amount. Confirm the base year premium the landlord is using matches the real premium from that year.
Anchor tenant departure and insurance pool changes
When a major tenant leaves a property, the insurance exposure and cost structure for remaining tenants can shift.
An anchor departure can trigger a change in blanket policy pricing, since a partially occupied building carries different risk than a full one. It can also shrink the pool of tenants sharing the premium, which mechanically raises each remaining tenant's share.
None of that automatically means an overcharge. But if a client's insurance line jumped 30% the same year the property lost an anchor tenant, that jump deserves a closer look. Check whether the CAM cap applies to insurance at all. Many leases exclude insurance and taxes from the cap calculation entirely.
CAMAudit Rule 9
Rule 9 applies AI classification to every insurance line item in a client's reconciliation. The classifier is trained on the categories commercial leases typically permit versus exclude.
When a line item matches a non-passable category (D&O, workers' comp, EPLI, coverage for other properties), the rule flags it. The flag comes with the reasoning and the dollar amount attached. When a large insurance line shows up with no breakout, the rule flags it for manual review and drafts a document request for the declarations page.
The classification is probabilistic, not a certainty. For insurance more than any other CAM category, the underlying policy documents make the final call. The rule tells your team where to look. The declarations page tells you what's there.
What to do when a line item looks wrong
Start with a written request for the declarations page and premium allocation schedule for every policy in the client's CAM charge. Cite the audit-rights clause and the specific line item in question. This is due diligence, not an accusation.
Once the declarations pages arrive, match every policy type against the lease's list of passable insurance expenses. Calculate the share attributable to non-passable coverage. That share is the potential overcharge.
If a clear error turns up, CAMAudit generates a dispute letter draft grounded in the specific findings. That includes the relevant lease language and the dollar amount at stake. It's a draft for your team's review, not legal advice. Have the client's counsel review it before it goes out.
Check the dispute deadline before sending anything. The window from delivery to formal dispute typically runs 90 to 180 days. Insurance is no different from any other category: miss the window, and the right to recover that year's overcharge usually expires.