Insurance Overcharges in CAM Statements: How Premium Pass-Throughs Go Wrong

Insurance is listed as an uncontrollable expense in most NNN leases, which means it sits outside the CAM cap. That exemption exists for a good reason — commercial property insurance premiums are driven by the market, not the landlord's decisions. But "uncontrollable" does not mean "unreviewed." Insurance allocations in CAM pools can overcharge tenants in at least three distinct ways: the amount allocated exceeds what was actually paid, the coverage types included are ones the lease does not permit, or the landlord passed on premium increases without crediting applicable discounts.

The insurance market context matters here. Commercial property premiums increased dramatically in 2023 — the Council of Insurance Agents & Brokers (CIAB) reported average increases of 20.4% in Q1 2023, 18.3% in Q2, 17.1% in Q3, and 11.8% in Q4, for a simple average of approximately 16.9% for the year. In 2024, the pace moderated to roughly 8.2% on average across CIAB's quarterly surveys, and 2025 data showed near-flat or negative pricing as the commercial property market softened. When insurance costs spike, tenants need to verify the allocation is based on actual documented premiums — not on a budget figure or an estimate.

Amount allocated exceeds actual premium paid

The simplest overcharge: the CAM pool includes $95,000 for property insurance, but the actual annual premium was $80,000. The $15,000 difference has no invoice to support it.

This can happen when a property manager uses a budget-based allocation rather than the actual invoice amount. Budget-to-actual differences are supposed to be reconciled at year-end, but if the property management system defaults to the budgeted figure and the reconciliation is not adjusted, tenants pay based on projections rather than actuals.

It also happens when a blanket insurance policy covers multiple properties under a single master policy. The allocation of a master policy premium across individual properties is done internally by the landlord, and that methodology may not match what the lease requires. A published office lease filed publicly with the SEC includes a provision specifically addressing this scenario — if earthquake insurance was not maintained in the base year and is later added, the landlord cannot include the new premium in operating expenses without simultaneously adjusting the base year to reflect what costs would have been had that coverage existed from the start.

The fix is to request the insurance certificate and the actual premium invoice. The certificate identifies the policy, the coverage period, and the carrier. The invoice shows what was paid. If the CAM allocation exceeds the premium, the difference is recoverable.

Unauthorized coverage types

Your lease defines what insurance costs are recoverable. Common authorized types include property and casualty insurance, general liability insurance for the common areas, and rental loss coverage. What is frequently excluded:

Earthquake and flood insurance. These coverages protect against catastrophic events and are often added or dropped based on the landlord's risk tolerance, not the building's baseline operating needs. Published lease examples show this treated as a disputed category — a tenant-protection provision in a publicly filed lease ties earthquake insurance recoverability to whether that coverage existed in the base year, effectively preventing the landlord from adding new coverage types mid-lease and billing tenants for them.

Directors and officers (D&O) insurance. This is entity-level coverage protecting the landlord's principals. It has nothing to do with property operations and should not appear in the CAM pool.

Employee practices liability insurance (EPLI). Covers the landlord's employment disputes. Not a property operating cost.

Umbrella or excess liability policies above standard levels. Some umbrella coverage relates to the property and some extends to entity-level risks. If the umbrella was priced based on entity-wide exposure rather than the specific property's liability profile, the allocation method is questionable.

In Tin Tin Corp. v. Pacific Rim Park, LLC, 170 Cal.App.4th 1220 (Cal. Ct. App. 2009), the court reversed a finding that allowed the landlord's LLC taxes and fees to pass through the CAM pool. While that case addressed entity-level taxes rather than insurance, the reasoning applies: entity-level costs dressed up as property costs are not recoverable through operating expense definitions, regardless of how the landlord categorizes them internally.

Unreturned insurance refunds

When a landlord successfully disputes an insurance claim or receives a partial premium refund, that money should flow back to tenants through the CAM reconciliation in proportion to their pro-rata share. If the landlord receives a $30,000 premium adjustment and does not credit it to the pool, every tenant has been overcharged by their pro-rata share of that amount.

This also applies when a prior-year premium was billed and later adjusted. If the CAM pool for year three included $70,000 for insurance and the actual year-three premium turned out to be $60,000 after adjustments, the $10,000 difference should be credited in year four's reconciliation.

Worked dollar example

Your building's CAM pool for the year includes $112,000 for insurance. Your pro-rata share is 7%. Your share = $7,840.

You request the insurance documentation and find:

Actual property insurance premium: $88,000
General liability premium: $12,000
Umbrella policy (entity-level coverage): $8,000
Earthquake insurance (not referenced in your lease): $4,000

Total authorized insurance: $88,000 + $12,000 = $100,000 Unauthorized items: $8,000 (entity umbrella) + $4,000 (earthquake) = $12,000

Your share of unauthorized insurance: $12,000 × 7% = $840

Additionally, the total authorized premium ($100,000) is $12,000 less than the $112,000 allocated. Your share of that excess: $12,000 × 7% = $840.

Total overcharge for the year: $1,680. Over a 10-year lease with similar insurance costs, that is roughly $16,800 — not counting any years where the premium spike from 2023 resulted in a higher-than-actual allocation.

How to check your insurance allocation

Pull the insurance line items from the CAM reconciliation with descriptions.
Request the actual insurance certificate(s) for the coverage period and the premium invoice(s). The certificate identifies the insured property, the coverage types, and the policy period. The invoice shows the premium paid.
Compare the CAM allocation to the documented premium. If the allocation is higher, the difference is an overcharge.
Check whether the coverage types in the policy match what the lease authorizes. Flag any coverage that does not relate to the property's operational risk.
If the property is covered under a blanket policy, request the allocation methodology. The method should be documented and should correspond to the property's share of the total insured risk.
Check whether any prior-year refunds or adjustments were credited to tenants.

What documentation to request

The insurance certificate(s) for each coverage period in the reconciliation
The premium invoice(s) showing actual amount paid
For blanket policies, the allocation methodology used to assign costs to this property
Documentation of any claims or premium adjustments that affected the coverage period
The lease provision defining permitted insurance types

Frequently asked questions

Is my landlord required to maintain specific insurance?

Most NNN leases require the landlord to maintain property and liability insurance in amounts meeting a standard (often $X million per occurrence). What types and coverage amounts are required is a lease negotiation point. What matters for the overcharge analysis is whether the specific insurance in the CAM pool corresponds to what the lease authorizes.

Can insurance premiums be legitimately higher than expected?

Yes. The commercial property insurance market experienced significant increases from 2021 through 2024, particularly for properties in coastal regions, areas prone to wildfire, or large urban properties with concentrated risk. Increases of 10-20% in a single year are not inherently an overcharge — they reflect actual market conditions. The overcharge question is whether the amount allocated corresponds to what was actually paid, and whether the coverage types are ones the lease permits.

What if the landlord refuses to provide the insurance certificate?

Your lease's audit rights clause typically entitles you to documentation supporting the reconciliation amounts. If the landlord refuses to provide an insurance certificate, document the refusal in writing. A landlord who cannot or will not support a CAM line item with documentation is in a weak position if the dispute escalates.

Yes, in most leases. Your pro-rata share of the authorized insurance premium is your share of the CAM pool. If the insurance is separately stated from the rest of CAM, check whether the denominator for the insurance allocation is the same as for the rest of CAM — some leases allocate insurance differently.

What if my lease caps insurance pass-throughs?

Some leases cap insurance at a percentage of the prior year's amount, or include insurance within a general CAM cap. If your lease has such a provision, apply the cap calculation to the insurance line item separately from other CAM expenses.

CamAudit classifies insurance line items from your CAM reconciliation and compares them to the coverage types authorized in your lease. The system also checks whether the total insurance allocation in the pool exceeds the documented premium amount and flags the pro-rata dollar impact.

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See also: The CAM Overcharge Detection Playbook — all 12 detection rules with worked examples.