Insurance overcharges are the third most common CAM error, appearing in 38% of audited reconciliations. Landlords pass through inflated premiums, non-CAM policy costs, and insurance on excluded properties. Here is how to find them.
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Find My OverchargesSee a sample report firstInsurance costs passed through in commercial CAM can include property insurance, liability insurance, and specialized coverage. 38% of audited reconciliations contain insurance overcharges. Landlords pass through premiums on non-CAM property, inflate policy costs, and bill for coverage that exceeds what your lease allows.
Insurance is one of the most opaque CAM line items because tenants have no direct visibility into what policies the landlord carries, what those policies cost, or what portion of those costs legitimately relates to the leased premises. Most tenants see a single "insurance" line item in their CAM reconciliation and have no basis for evaluating it.
The lack of visibility is exactly why this category has a 38% overcharge detection rate. It is not that landlords are necessarily acting in bad faith: many insurance overcharges stem from sloppy expense allocation, passing through policies that cover multiple properties, or failing to exclude non-CAM insurance costs. But the outcome for tenants is the same: a recurring annual overcharge that goes unquestioned because there is nothing in the reconciliation to question.
I built CAMAudit's Rule 9 (Insurance Overcharge) to perform the market rate comparison and excluded-property test that tenants need to identify these charges but almost never run manually.
Most commercial NNN leases allow the landlord to pass through the following insurance costs as part of CAM or as a separate operating expense:
Property insurance (building coverage): Insurance on the physical structure of the building against fire, windstorm, hail, vandalism, and related perils. This is the core insurance cost in most commercial CAM statements.
General liability insurance: Coverage for third-party bodily injury and property damage claims arising from the operation of the building. This is standard and almost universally included in CAM.
Umbrella/excess liability: A supplemental liability policy that provides coverage above the limits of the primary general liability policy. Most commercial leases allow umbrella coverage passthrough.
Earthquake insurance (in designated zones): In seismic risk zones (California, Pacific Northwest, parts of the Midwest), earthquake insurance is a legitimate CAM expense if the lease allows it.
Flood insurance (in designated flood zones): In FEMA flood zones, flood insurance is standard. Outside designated zones, this is a potential overcharge.
What you should see in a well-drafted CAM reconciliation: a line item for property insurance, a line item for liability insurance, and possibly a line item for umbrella or specialized coverage that is explicitly permitted by the lease.
The following eight categories are commonly billed in error as part of the insurance component of CAM. Each entry includes the definition, the lease test, and the detection method.
Definition: Insurance covering the landlord's furniture, equipment, tools, or other personal property located in the building.
Lease test: CAM insurance provisions cover the building and its common areas. The landlord's personal contents are not part of the common area operating costs.
Detection: Request an itemized list of all insured assets under the property insurance policy. Any personal property items belonging to the landlord are not CAM-eligible.
Definition: Life insurance or key-man coverage on building managers, property management executives, or landlord principals.
Lease test: These are personal insurance products for the landlord's business, not property operating costs.
Detection: Review the insurance certificate for policy types. Life insurance and key-person policies will appear as separate policy types. Challenge any life insurance premium appearing in CAM.
Definition: Workers compensation coverage for the landlord's direct employees who work at the property (maintenance staff, management staff on-site).
Lease test: Many leases explicitly exclude workers compensation from the CAM insurance pool, particularly where the lease distinguishes between third-party contractors (whose workers compensation is their own expense) and the landlord's direct employees. Check your lease's exact language.
Detection: Request the workers compensation policy certificate. In states where landlords routinely pass through this cost, compare the premium to the number of direct employees assigned to the property. Landlords sometimes inflate the workers comp allocation by assigning more FTEs to the property than actually work there.
Definition: Fidelity bonds cover the landlord against employee theft or dishonesty. They protect the landlord's financial interests, not the building or tenants.
Lease test: Fidelity bonds are an internal risk management cost for the landlord's business. They have no relationship to operating the physical property.
Detection: Look for any line item labeled "bond," "fidelity," or "employee dishonesty" in the insurance section of your CAM reconciliation. These are not operating expenses.
Definition: Business interruption insurance replaces income the landlord loses if the property becomes unusable due to a covered event.
Lease test: Business interruption insurance protects the landlord's revenue stream, not the building's operating costs. The landlord's lost rent is not a CAM expense.
Detection: Business interruption is sometimes bundled in a "commercial package policy" with property insurance. Request the policy premium breakdown by coverage type. Allocate only the property and liability portions to CAM.
Definition: Landlords who own multiple properties or mixed-use developments may carry blanket policies that cover all their holdings. Passing through the full blanket premium to tenants of one property charges those tenants for coverage on other buildings.
Lease test: Your CAM obligation covers the property described in your lease. Insurance on adjacent properties, other buildings in the landlord's portfolio, or non-CAM common areas is not your expense.
Detection: Request the property schedule on the landlord's insurance policy. If the policy covers multiple addresses beyond your leased property, require the landlord to allocate the premium to your building only, based on the insured value or square footage of your building relative to total insured properties.
Definition: Landlords may carry higher coverage limits or broader coverage than what similarly situated properties require, or may use insurance carriers whose premiums exceed market rates.
Lease test: Most leases do not explicitly require insurance to be obtained at the lowest available cost, but some include language requiring "commercially reasonable" premiums or premiums "consistent with prevailing market rates."
Detection: This is the market rate comparison test that CAMAudit's Rule 9 performs. CAMAudit compares the insurance cost per square foot in your reconciliation to industry benchmarks by property type and market. A building in a non-coastal market paying $1.25 per square foot in insurance premiums when the benchmark for similar buildings is $0.60 to $0.80 is a likely premium inflation finding.
Definition: Many commercial leases require the tenant to carry insurance on their own tenant improvements. If the landlord's property insurance also covers those tenant improvements and bills that coverage to the tenant through CAM, the tenant is paying twice.
Lease test: Review both your commercial tenant insurance requirements (typically in the lease's insurance article) and the CAM insurance passthrough provision. If the lease requires you to insure your tenant improvements and the landlord also passes through coverage of those improvements, challenge the duplication.
Detection: Compare the insured asset schedule in the landlord's property policy to your lease's tenant improvement insurance obligations. Overlapping coverage on the same assets is a documented duplicate charge.
Post-hurricane insurance inflation in Florida and other coastal markets has created a distinctive insurance overcharge pattern that affects a large number of commercial tenants and is growing in magnitude.
Florida commercial property insurance premiums increased 30 to 50% from 2022 to 2024, driven by escalating hurricane risk, reinsurance market withdrawal from the Florida market, and insurer insolvencies following Hurricane Ian (2022) and Milton (2024). Similar (though less severe) inflation has occurred in Texas Gulf Coast markets, North Carolina coastal areas, and Louisiana.
For tenants in NNN leases with unrestricted insurance passthrough provisions, this premium inflation passed directly through to CAM statements. A tenant who was paying $8,000 per year in insurance passthrough in 2021 may be paying $15,000 to $18,000 in 2024 for identical coverage on an unchanged building.
This is not necessarily a billing error if the insurance increase is real and the policy covers the tenant's building. But it creates several detection opportunities:
Blanket policy reallocation errors: Florida landlords with multiple properties often consolidated into statewide or national surplus lines policies. If the landlord is allocating the full statewide premium to one property, the allocation methodology is challengeable.
Coverage scope creep: Some landlords used the market disruption to expand coverage (higher limits, broader perils, lower deductibles) beyond what the lease requires. The incremental premium for coverage beyond the contractually required level is not a CAM expense.
Market rate comparison: Even in the distorted Florida market, there is a range of reasonable premiums. Premiums at the top of the market range that cannot be justified by building characteristics or coverage terms are challengeable.
Deductible structure: High-deductible policies may carry lower premiums. If the landlord chose a lower-deductible policy that costs more, and the lease requires only "commercially reasonable" coverage, the premium difference attributable to the landlord's deductible preference may not be fully passable.
Scenario: 15,000 sq ft office tenant in a 120,000 sq ft suburban office building (12.5% pro-rata share). Annual CAM reconciliation includes $210,000 in insurance costs.
| Insurance Line Item | Amount Billed | Legitimate for CAM? | Amount Challenged | Notes |
|---|---|---|---|---|
| Property insurance (building only) | $96,000 | Yes | $0 | $0.80/sf for building only |
| General liability | $24,000 | Yes | $0 | Standard premium for building size |
| Umbrella liability | $18,000 | Yes (if lease allows) | $0 | Lease explicitly permits |
| Business interruption | $36,000 | No | $36,000 | Covers landlord's lost income |
| Key-person life insurance | $12,000 | No | $12,000 | Personal coverage for property manager |
| Adjacent building (separate parcel) | $24,000 | No |
Over a 3-year lookback, this tenant's insurance overcharge totals $27,000 before any interest or late-charge adjustments.
Your lease's audit rights provision covers insurance documentation as part of "books and records related to operating expenses." These are the specific requests that support an insurance overcharge investigation:
Certificate of Insurance (COI): The COI identifies the insurer, policy number, policy type, coverage limits, and named insured. This tells you the basics of what is being passed through.
Policy declarations page: The declarations page provides the full premium breakdown by coverage type, the premium for each coverage section, and the property schedule. This is the most useful document for identifying non-CAM coverage and multi-property allocation.
Premium history for 3 to 5 years: Year-over-year premium history lets you validate the landlord's stated insurance increases and compare them to published market indices for commercial property insurance in your geographic area.
Property schedule and insured values: The property schedule lists every insured property under the policy. If the landlord carries a blanket policy, this schedule identifies all covered properties and allows you to calculate the appropriate pro-rata allocation to your building.
If the landlord refuses to provide these documents under the audit rights clause, document the refusal in writing. Most commercial lease audit rights provisions entitle the tenant to operating expense documentation, and insurance premiums are operating expenses.
CAMAudit's Rule 9 (Insurance Overcharge) runs two tests:
Market rate comparison test: The rule compares the insurance cost per square foot in the reconciliation against industry benchmarks by property type and geography. Benchmarks are sourced from IREM Income/Expense Analysis data and BOMA operating cost surveys. A building with insurance costs significantly above the benchmark range for comparable properties in the same market is flagged as a potential overcharge for further investigation.
Excluded category test: The rule classifies each insurance line item against the permitted insurance categories in the CAM clause. Line items that do not match permitted categories (business interruption, life insurance, fidelity bonds, adjacent property coverage) are flagged as specific overcharges with the dollar amount.
The findings include the specific line items challenged, the market rate comparison, and a documentation request list specific to the violation type identified.
“Insurance is the most invisible CAM line item for tenants because there is nothing in the reconciliation that tells you what you are actually paying for. A single number labeled 'insurance' could contain coverage for three other buildings, business interruption, and key-man life insurance. CAMAudit flags the market rate deviation and generates the specific documentation requests tenants need to unpack what is really in that line.”
Once CAMAudit or your own analysis identifies a specific insurance overcharge, these are the action steps:
Step 1: Document the finding with specifics. Identify the exact line item, the amount billed, the reason it is not CAM-eligible (or the market rate deviation), and the dollar overcharge.
Step 2: Calculate the multi-year impact. Insurance overcharges are recurring. If business interruption insurance has been in the CAM pool for 4 years, you have 4 years of recoverable overcharge. Apply your lookback period.
Step 3: Send a dispute letter draft. The letter should: identify the specific insurance line item by name and dollar amount; cite the lease provision governing insurance CAM inclusions; state the specific reason the charge is not CAM-eligible (definition, market rate, excluded property); and request a credit for the overcharge for all years in the lookback period.
Step 4: Request the supporting documentation. Include with the dispute letter a written request for the COI, policy declarations page, and premium history. If the landlord provides documentation that disproves the overcharge finding, acknowledge it. If the documentation confirms the finding, state the amounts and request the credit.
Step 5: Follow up in writing. Give the landlord 30 days to respond. If there is no response or a denial without substantive basis, escalate to formal audit rights exercise or legal counsel review depending on the dollar amount and your lease terms.
| $24,000 |
| Different property, different address |
| Total Billed | $210,000 |
| Total Challenged | $72,000 |
| Tenant's 12.5% Share of Overcharge | $9,000/year |