A retail tenant's lease permitted pass-through of "commercial general liability and property insurance for the shopping center." The reconciliation included $11,900 in "insurance premiums" broken down into property insurance ($8,200), earthquake coverage ($2,300), and directors and officers liability ($1,400). CAMAudit classified the earthquake and D&O premiums as non-standard pass-through costs and flagged $3,700 as a potential overcharge.
← All detection rules
09
Rule 9 of 20 · Classification rule
Insurance Overcharge: Which Premiums the Landlord Cannot Pass Through
Not all insurance costs are pass-through eligible. Specialty, executive, and catastrophe insurance premiums that protect the landlord's interests rather than the building's operations are common unauthorized charges.
If a landlord is passing through executive liability, terrorism, or environmental insurance premiums, the client may be paying for specialty coverage that protects the landlord's business, not the building. These premium types can add $2,000 to $5,000 to a single year's insurance line.
What it checks
An insurance overcharge occurs when a landlord includes insurance premium costs in a CAM reconciliation that are either prohibited by lease exclusions or unrelated to the standard property and liability coverage that tenants are obligated to share. Commercial leases typically permit pass-through of commercial general liability insurance and property insurance covering the building structure, but exclude specialty coverages, executive-level policies, and deductibles that represent the landlord's own risk retention. Specialty exclusions that appear frequently in overcharge disputes include earthquake and flood insurance, terrorism coverage, directors and officers liability, environmental liability, and umbrella policies above standard limits. CAMAudit's insurance overcharge detection rule uses AI classification to categorize each insurance line item and cross-references the identified coverage type against both the lease's insurance provisions and established norms for permissible pass-through coverage, flagging any premium type that lacks explicit lease authorization.
The logic
Insurance Overcharge in 3 passes
- 1
CAMAudit uses AI classification to categorize each insurance line item in the CAM reconciliation. CAMAudit's insurance overcharge detection rule distinguishes between standard property and liability premiums, which are generally pass-through eligible, and specialty coverage types that are commonly excluded: earthquake, flood, terrorism, environmental liability, directors and officers, umbrella policies above standard limits, and loss-of-income insurance.
- 2
CAMAudit cross-references identified insurance types against the lease's specific insurance provisions and exclusion list. When a line item matches an excluded category or an insurance type with no lease authorization, CAMAudit flags it as a potential overcharge with the specific policy type noted alongside the dollar amount.
- 3
CAMAudit generates a finding report identifying each flagged insurance type, the dollar amount billed, and the lease provision that does or does not authorize it. When the lease's insurance language is ambiguous, CAMAudit notes that ambiguity so your firm can request the actual policy documentation and evaluate coverage scope against the client's specific lease terms.
What a finding cites
Related glossary terms
FAQ
Questions about insurance overcharge
What insurance costs can a landlord legally pass through?
Standard commercial general liability insurance for the building and grounds, property insurance covering the building structure, and standard umbrella policies are generally permissible pass-throughs. The specific categories a landlord can charge must be defined in the lease insurance provisions. Anything not named in those provisions requires explicit authorization.
Why are earthquake and terrorism insurance premiums commonly disputed?
These are specialty coverages with premiums that can fluctuate dramatically and are not standard operating costs of a commercial property. Many leases were drafted before these coverages became common, and the existing pass-through language does not clearly authorize them. Their inclusion in CAM requires explicit lease authorization, which older leases often do not contain.
Can a landlord pass through insurance deductibles?
Insurance deductibles represent the landlord's self-insured risk retention and are generally not legitimate CAM expenses. Passing through a deductible effectively shifts the landlord's risk to tenants without a corresponding premium benefit. Most leases that address deductibles explicitly exclude them from CAM.
How does a firm get documentation on the insurance charges in a client's CAM statement?
Request copies of the insurance certificates and premium invoices for each policy included in the reconciliation. The audit rights clause entitles the client to these records. The documentation will show coverage types, policy limits, and premium amounts so your firm can verify which charges are authorized under the lease.
Run this check on a client's lease today.
CAMAudit runs all 20 detection rules on every audit and drafts the dispute letter under your brand.