Wednesday, October 24, :30 4:45 PM. Peer to Peer 1

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1 Wednesday, October 24, :30 4:45 PM Peer to Peer 1 Subject to Review by Risk Management; Earn Confidence in Your Ability to Review Insurance and Indemnity Provisions Presented to 2018 U.S. Shopping Center Law Conference JW Marriott Orlando, Grande Lakes Orlando, FL October 24-27, 2018 by: Abe Freeland Executive Vice President Willis Towers Watson 26 Century Boulevard Nashville, Tennessee abe.freeland@willistowerswatson.com Karen O Malley Director Goulston & Storrs, P.C. 400 Atlantic Avenue Boston, MA komalley@goulstonstorrs.com

2 Subject to Review by Risk Management; Earn Confidence in Your Ability to Review Insurance and Indemnity Provisions 1. Index - Lease Clauses governing the allocation of risk: A. A surprisingly long list: As a practice tip (and as you may or may not observe in the hypotheticals), these clauses, including but not limited to additional insured status, indemnification and waiver of subrogation, should reconcile with each other to avoid disputes, delays, and attendant increased risks. The risk allocation provisions of a lease can be determined based on a number of factors, i.e., on the basis: (1) that the party at fault, and its insurer(s) should cover the loss; (2) that the party best controlling the risk should carry insurance and handle the loss; (3) of standard practice: typical practices in the shopping center industry; (4) of bargaining power, enabling one party to shift risks; (5) of practicality, including determining who can insure the risk at the best cost and, at times, requiring the reimbursement of insurance expense. B. Principals of Allocation: (1) Trade Practice: It may be customary in the industry for one party to responsible for a particular loss. (2) Bargaining Power: One party s negotiation leverage may be strong enough to enable it to shift responsibility for the loss to the other party. (3) Control: One party may be in a better position to control the risk, or handle the loss. (4) Fault: The party at fault should cover the loss. (5) Efficiency: The fairness of making a negligent party pay for losses caused by its negligence may be less important to the parties then the desire to allocate risk in a practical and cost-effective way. C. Direct allocation: specific clauses allocating maintenance and repair obligations: for example, a clause that allocates responsibility for maintenance and repair of a roof, common areas and/or tenant improvements to landlord or tenant. D. Casualty: every lease has a casualty clause, usually drawing a distinction between partial damage and major damage, defining rebuilding responsibilities (including timing), permitting landlord termination rights under some circumstances and negotiated tenant termination rights, addressing rent abatement, and addressing lender rights to insurance proceeds. E. Indemnity: Transfers responsibility for defined third party claims. (1) Comments: Some states, including Florida, require that an indemnification expressly include an indemnity for the other party's negligence. Insurance Standards Office Commercial General Liability policies provide contractual liability which covers legal indemnity subject to policy terms and conditions, hence insurable risks are transferred to the insurer. However, contractual liability coverage is not so broad as to extend coverage to any or every indemnification obligation assumed by contract. Therefore, it is important to confirm that any broad-form indemnification requirements, including indemnities for the other party s sole and exclusive negligence, are covered by insurance. Although many contracts still reference the version of the ISO additional insured endorsement which provides the additional insured defense and indemnification under the named insured s policy even for the additional insured s sole negligence, most states have antiindemnity statutes which prohibit indemnification for sole or partial negligence (or both).

3 Some states use anti-indemnity statutes to limit the scope of coverage afforded additional insureds, although loopholes still exist in certain states which allow a broad scope of coverage even if indemnity is limited by statute. States are increasingly closing the additional insured loophole by limiting indemnity even when broad additional insured status would otherwise exist. In most states, even if an indemnity for the other party's negligence would be covered by insurance, any indemnification for claims arising from the other party's gross negligence or willful misconduct would be against public policy. F. Insurance: Provides a source of funds to satisfy claims and liabilities and to rebuild and restore. Leases address requirements for liability insurance, property insurance, automobile insurance, liquor liability insurance, business interruption insurance, rental replacement insurance, flood insurance and other specific types of insurance applicable to the tenant's use and the landlord's requirements. (1) Additional insured status: Can be required under Commercial General Liability, Commercial Automobile Liability, Contractor s Pollution Liability and Umbrella / Excess Liability, but not under Workers Compensation, Employer s Liability or Professional Liability insurance coverage. (c) For construction or renovation projects with completed operations exposure, additional insured status can be required from contractors under additional insured form CG (current edition) and completed operations under CG (current edition). ISO additional insured forms changed in 2004 so that an additional insured s liability must arise in whole or in part from actions of the named insured. The 2013 ISO language qualifies the effectiveness of the additional insured endorsement by providing that the coverage afforded will be the lesser of the amounts required by contract or provided by the policy" (See ISO CG and CG ). Commentators have generally assumed that the purpose of this limitation is to conform the protection afforded by additional insured status to the limitations imposed by applicable antiindemnification laws. Additional insured endorsements generally also provide that the coverage provided under the additional insured endorsement will not be broader than the coverage provided by contract or agreement. The requirement of being named as an additional insured should, therefore, be an express term of any lease or agreement. Additional insured status will typically be available only up to the policy amounts required under a specific lease. For example, if the insured carries $100 million in liability insurance and the lease required $5 million, then the additional insured status would be applicable to $5 million in liability insurance. (2) Certificates of Insurance: Certificates of insurance contain numerous disclaimers and warnings and do not provide binding evidence of insurance. Most certificates are on "Acord" forms, issued by the Association for Cooperative Research and Development. As the Acord website ( describes this under its FAQs, "A Certificate of Insurance is NOT an insurance policy, and does not service to provide, endorse, amend, extend or alter in any way the terms of an insurance policy. Only an endorsement, rider or amendment to the policy can effect changes in coverage. Reference to a contract between the client and a third party on a certificate does not provide coverage." The Acord website maintains a current compilation of current firms. Some leases include subjective terms for providing notice such as when a material change or reduction in coverage occurs, neither of which is defined. The safest way to comply with lease requirements is to require notice to the additional insured in the event of cancellation or non-renewal. Requirements to provide notice of "material change" or changes that cause the subject insurance to fall below the contractual requirements should be placed on the insured or its insurance broker if they are to have any meaning.

4 (c) Acord has now issued certain forms that are referred to as "Evidence of Insurance" instead of "Certificates of Insurance) (i.e., Acord 27, Evidence of Property Insurance and Acord 28, Evidence of Commercial Property Insurance.) Acord carefully describes this change as merely a change in form, noting that they are informational certificates only. Larger insureds will commonly vigorously resist any effort to obtain a copy of their actual policies, but this remains the most accurate manner to actually verify coverage. Another alternative would be to request a copy of the policy declarations page as described below. (3) The Policy Declaration page of the insurance policy is a terrific, if coded summary of the policy itself. It will tell the reader what property is covered, either by its address or by specific descriptions, how much coverage it afforded in total and as to some particular sub-limits for certain types of coverage or property, and also what options within the coverage have been elected. Very importantly, it will list all of the various documents and forms that make up the policy itself, and it will do so by use of their form numbers. G. Waiver of Subrogation: Usually a mutual waiver, but at times a one way waiver, of the right of one party's insurance company to seek reimbursement from the other party's insurance company. (1) The crafting of the waiver of subrogation can vary, sometimes waiving all claims (including the deductible and excess amounts), sometimes being self-operative and sometimes requiring specific insurance clauses, and sometimes addressing both property damage and claims for bodily injury. (2) Most leases limit waivers of subrogation to losses covered by property insurance, but waivers of subrogation may also include other insured losses, including those covered by commercial general liability policies, auto, etc. The right to waive subrogation rests with the insured and requires action on the insured s part by way of written consent prior to a loss Tenant shall waive, and shall cause its insurers to waive, any rights of subrogation as respects claims covered, or which should have been covered, by valid and collectible insurance H. Exculpation: A contractual agreement the waiving party to release the exculpated party from liability for loss arising from the exculpated party s fault and/or for which the exculpated party would normally be financially responsible. The waiving party thereby, in effect, is relinquishing its right to seek recovery for loss from the exculpated party. 2. Liability Insurance and Property Insurance: Coverage for the Major Categories of Risk (but additional policies with flood insurance and windstorm examples may be required.) A. Contracts of Indemnity: It is useful to remember that an initial definition of insurance is that it is a "contract of indemnity", a contractual means to pay for losses that the insured would otherwise bear. As with any indemnification, the financial statement of the indemnitor (in this case, the insurance company) requires analysis. (1) Insurance Company Ratings: A.M. Best Company is the most frequently used rating agency; its current webpage (ambest.com) describes its service as providing "a comprehensive analysis consisting of a quantitative and qualitative evaluation of balance sheet strength, operating performance, and business profile or, where appropriate, the specific nature and details of a security" (the letter rating) and the insurance company's financial size The Best's Credit Rating ("BCR") is a forward looking, relative predictor. "Best's ratings", as they are typically described, consistent of two components. A sample rating would be, for example, A+III. The alphabetical portion of the rating is the credit component, an evaluation of financial strength. The numerical portion indicates the financial size category (FSC) of the insurance company to assist in determining whether the insurance company has sufficient financial

5 capacity when measured against the subject policy limits. Generally speaking, one should not accept a carrier rating of less than A- VII. (c) Standard & Poors (S&P) Global Ratings and Moody's also provide alternative rating systems that are often acceptable, although less frequently employed. S&P is more commonly required by lenders in commercial real estate transactions. All of the ratings agencies maintain informative websites that allow access to current ratings. i. Qualified or licensed? Require insurance companies that are licensed to do business: every state, the District of Columbia, Puerto Rico and the Virgin Islands maintain guaranty associations to pay certain outstanding claims of insolvent insurance companies licensed to do business in their jurisdiction. The coverage is not available for failed insurance companies merely qualified to do business (in contrast to being licensed). B. Liability insurance: To insure the covered risks of bodily injury (including death) and damage to the property of a third party i.e., if the landlord damages the tenant's property or the tenant damages the landlord's property. C. Property insurance: To insure covered damage to owned property or leased property when there is a contractual obligation to insure. Although the term "casualty insurance" can be employed, this term is ambiguous and can be confusing since it is often applied broadly to describe liability insurance. D. Builders Risk Insurance: insurance for covered risks to construction materials, fixtures and equipment in the course of construction to be incorporated into the finished project. E. Business interruption insurance: To insure risks of business disruption caused by loss of use caused by property damage, interruption to utility or elevator service, or other covered reasons. Business interruption expenses would include fixed costs, such as payroll, taxes and utilities that would remain notwithstanding any rental abatement. 3. Property Insurance: A. Coverage Amounts and Valuation: determines the dollar amount payable by insurance in the event of a covered loss. (1) Replacement Cost Coverage: The amount it would cost to repair or replace insured property with an item of the same kind or quality, and should trigger at least annual reviews to assure that the policy limits correspond with increases or decreases in replacement costs. (2) Actual cash value: Deducts depreciation. (3) Stated amount: Includes a fixed amount usually not a preferred practice and more typically utilized in personal lines insurance. (4) Blanket Coverage: While blanket coverage can also refer to a single policy that covers more than one type of property at the same location, the term more typically applies to property insurance policies that provide coverage for multiple locations. Each party would typically, when permitting blanket coverage, require that the blanket policy provides at least the same limits as required for an individual policy, and language that safeguards insurance for the subject property from diminution or exhaustion from claims at another covered property. Blanket coverage in essence applies in a manner that would apply the same amount of coverage as if the property at issue was a stand-alone and not part of a larger portfolio.

6 Blanket coverage is less appropriate for insurance coverage that is subject to an annual limit applicable both to stand alone and blanket policies. whether or not insured as a stand- alone or as part of a blanket policy. B. ISO and Manuscript Policies: While institutional owners and national tenants may have negotiated "manuscript" policies that typically enhance standard coverage, most lease agreements will require insurance at least as broad as that provided under the standard forms issued by the Insurance Services Office, Inc. ("ISO"). (1) Consider replacement cost coverage for any business or personal property, tools and equipment, tenant improvements, etc. (2) Maximum deductible requirements, particularly for catastrophic perils subject to percentage deductibles, can also be problematic for larger insureds who have a reasonable risk tolerance and do not want to trade premium and claim dollars with carriers in order to maintain low deductibles. C. Basic Form (ISO Form CP 10 10) Coverage i (formerly known as Fire and Extended Coverage ) protects the insured against the following fourteen (14) causes of loss (unless amended in policy form) as summarized in the following list; the actual form should be consulted as there are state by state and other variations: (1) Fire; (2) Lightning; (3) Explosion, but excluding loss or damage by: rupture, bursting or operation of pressure relief devices, or rupture or bursting due to expansion or swelling of the contents of any building or structure, caused by or resulting from water. (4) Smoke causing sudden and accidental loss or damage (not including smoke from agricultural smudging or industrial operations); (5) Physical contact of an aircraft or vehicle (excluding loss or damage from objects falling from an aircraft, and also excluding loss caused by or resulting from vehicles owned by the insured or which are operated in the course of its business); (6) Riot; (7) Civil commotion; (8) Vandalism (excluding theft, but including break in damage); (9) Sprinkler leakage (which is carefully defined); (10) In some states, windstorm (although states like Florida exclude windstorm damage in standard policies); (11) Sinkhole collapse, although this can also differ on a state by state basis; (12) Hail; (13) Volcanic action. (14) The typical basic form will exclude the following: Ordinance or law;

7 (c) (d) (e) (f) (g) (h) (i) (j) (k) Earth movement; Governmental action; Nuclear hazard; Utility services; War and Military Action; Water, but including resulting loss from fire, explosion or sprinkler leakage; fungus, wet rot, dry rot, and bacteria; see other exclusions, that exclude coverage for losses, for example, from electric arcing, rupture or bursting of water pipes (but including automatic sprinkler damage), explosion of steam pipes and boilers, and mechanical breakdown; see in particular the exclusion for losses because of "neglect of an insured to use all reasonable means to save and preserve property from further damage at and after the time of loss" and see also the distinctions between losses caused by utility failures in the covered building, and those caused by failures outside of the building (including insufficient capacity or reduction in supply) and the other specific inclusions and exclusions from coverage. D. National and other sophisticated tenants will often obtain special form coverage instead of basic form or broad form. E. It is critical that a client's insurance representatives review lease requirements and coverage to ensure coverage and that requirements are current; since forms change, current reviews and comments are essential. F. Since forms change frequently, preferred language would be to allow for the equivalent current form. G. Special Causes of Loss Form, also known as all-risk, provides coverage for losses except for those that are specially excluded. This differs from the named perils form, which provides coverage for named causes of loss. H. Endorsements may amend policies in order to provide coverage for otherwise excluded risks. 4. Liability Insurance: Third party insurance that compensates a party injured by the actions or omissions of an insured. A requirement of the broadest available contractual liability coverage for commercial general liability is ambiguous, and, contractual liability does have limitations and agreeing to broad form contractual liability often implies coverage beyond what is available. Many insurance advisors comment that providing primary and non-contributory status is acceptable provided that such status only applies to the extent liability is caused by the insureds work, operations, occupancy of the Premises, etc., but suggest avoiding providing primary and non-contributory status for liability arising from the other party s activities. A. Risk Allocation: A common risk allocation scenario is for retail Landlords to provide commercial general liability coverage in the common areas and for Tenants to provide commercial general liability coverage within the leased premises, providing a source of funds for any tenant indemnity with respect to occurrences with in the Premises and a source of funds for claims arising in the common areas, whether or not the subject lease includes a separate indemnity by the landlord. This can be adjusted as appropriate for single tenant leases or other scenarios under which Tenant has control of the Premises including common areas.

8 B. Commercial general liability coverage/comprehensive general liability coverage: In the past comprehensive general liability insurance was offered as a basic policy with multiple possible endorsements. In 1986 the ISO changed this approach by issuing ISO form CG commonly referred to as a commercial general liability policy or CGL which simplifies matters by having within one policy what used to be obtainable only through multiple endorsements. C. Claims Made vs. Occurrence Based Coverage: Liability insurance written on an occurrence basis triggers coverage based on when the event occurred, providing comfort that defined liability insurance coverage will be available for events within the lease term. On the other hand, claims made liability insurance provides coverage if the claim (contrasted with the loss) is made within the policy period. (1) Example: Sybil slipped and fell in tenant's premises on September 10, 2016; tenant's lease expired on December 31, Sybil makes a claim against landlord and tenant on December 31, 2019, within the statute of limitations but after the lease expired. If tenant carried requisite insurance during the lease term, then Sybil's claim would be covered by insurance if the policy was written on an occurrence basis. But if the insurance was written on a claims made basis, and landlord's additional insured status lapsed when the lease expired, then tenant's insurance coverage would not protect landlord in an occurrence based policy. "Nose" and "tail" coverage may be available to provide to cover losses prior to or after the policy expires. D. Per Occurrence / Aggregate Limits: The typical lease will require commercial general liability insurance with a defined and acceptable coverage limit "per occurrence" (which would apply to all losses, whether for bodily injury or property damage, arising from a single event. The commercial general liability insurance policy will also include an annual limitation in the "aggregate" for losses occurring with the policy year. An umbrella policy would provide coverage (within its own limits) for claims exceeding the per occurrence limits. 5. Primary and Non-contributory Requirements: A common lease provision is that the insurance of one party will be "primary and non-contributory". This provision should be consistent with the presence or absence of additional insured status, discussed below, as each term will impact the priority of coverage. For example, if the landlord is named as an additional insured, then the landlord's insurance company will regard its coverage as excess liability insurance. Care should be taken, therefore, to avoid situations where one party's insurance is primary and non-contributory when the other party is named as an additional insured and the indemnity terms of the lease have yet another variant. This can lead to confusion and finger pointing amongst carriers in which case contribution by share might be the end result. 6. Indemnity: The party indemnifying the other in a lease will typically agree to be liable for third party claims, most often including defense costs and is another contractual means to allocate risks, in this instance to a third party. The landlord will typically want to be indemnified for risks and claims arising in the leased premises of a tenant. The tenant will typically want to be indemnified for risks and claims arising in common areas, may will frequently settle for the landlord's agreement to carry liability insurance. Indemnity provisions can vary in many respects: A. The indemnity can be limited to losses occurring within a defined area for example, the premises or the common area. B. The indemnity can include customers, agents, employees and invitees. The typical tenant will, for example, resist being responsible for the acts and omissions of customers and invitees when outside of the premises. C. The indemnity can vary the scope of indemnity based on which of the above parties causes the loss. D. The indemnity can broaden the definition of the indemnified party by including its employees, trustees, directors, partners, members, beneficiaries, successors, etc. This expansion of scope will typically be less controversial than the other efforts to broaden the indemnity. E. The indemnity can include an obligation to defend and can impose requirements on who may provide the defense. A sole landlord right to designate counsel may result in imposing all of the

9 financial obligations of defense on the tenant, and the tenant will prefer an agreement under which its selected counsel would be reasonably acceptable to the landlord. F. Sample indemnity clauses: (1) Sample 1: Tenant agrees to indemnify, defend and hold Landlord and Landlord's agents, shareholders, officers, partners and employees harmless from and against any and all claims, actions, damages, liabilities, and expenses allegedly or actually (i) arising from or out of the occupancy or use by Tenant of the premises or any part thereof or (ii) occasioned by any act or omission of Tenant or Tenant's employees, agents, contractors, sublessees, or concessionaires, excepting, however, in each case, any claims arising out of the negligence or willful misconduct of Landlord or Landlord's employees, agents or contractors. Landlord agrees to indemnify, defend and hold Tenant and Tenant's agents, shareholders. officers, partners, employees, sublessees, and concessionaires harmless from and against any and all claims, actions, liabilities, and expenses allegedly or actually (i) arising from or out of the use of the Shopping center outside of the Premises or any part thereof or (ii) occasioned by any act or omission of Landlord or Landlord's employees, agents or contractors, excepting, however, in each case, any claims arising out of the negligence or willful misconduct of Tenant or Tenant's employees, agents, contractors, sublessees, or concessionaires. (2) Sample 2: Except as otherwise required under applicable law, Tenant agrees to indemnify and save harmless Landlord from and against all claims, actions or damages of whatever nature arising from any act, omission or negligence of the Tenant, or Tenant's contractors, licensees, invitees,. agents, servants, or employees, or arising from any accident, injury death or damage whatsoever to any person, or to property of any person occurring during the term hereof in, on, or about the demised premises, or arising. from any accident, injury or damage occurring outside of the demised premises but within the Shopping Center, where such accident, damage or injury results or is claimed to have resulted from an act or omission or negligence on the part of Tenant or Tenant's contractors, licensees, servants, agents or employees. This indemnity and hold harmless agreement shall include indemnity against all costs, expenses and liabilities incurred in or in connection with any such claim or proceeding brought thereon, the defense thereof, and recovering hereunder including, implied limitation, reasonable attorney's fees and expenses. And added by amendment: Landlord agrees to indemnify and save harmless Tenant from and against all claims, actions or damages of whatever nature arising from any act, omission or negligence of Landlord or Landlord's agents, employees or independent contractors. (3) Anti-indemnity statutes exist in many states and can vary in scope: Some states, for example, will disfavor an indemnification for the negligence of the other party, but permit such indemnification if the negligence of the other party is expressly included in the scope of the indemnification. Other states will bar an indemnity for sole negligence or an indemnity for any negligence. Some anti-indemnity statutes have specific provisions or restrictions depending on the subject of the indemnity including, for example, applicability that may be specific to the construction setting. Some jurisdictions have statures which limit or prohibit indemnification against a party s own negligence. The contractual risk allocation structure must be viewed, therefore, with the backdrop of applicable state law. 7. Sole responsibility and Exculpation: Provisions releasing a party from liability, or assigning sole risk and responsibility for defined risks, are also typical lease provisions. These clauses can arise in several contexts: allocating liability for damage to inventory, releasing a landlord from post-sale liability, releasing a landlord from losses resulting from the bursting of pipes, etc. It is critical to confirm that these "exculpation" clauses are consistent with other risk allocation provisions. 8. Casualty and Rebuilding Requirements: Likewise, the typical lease will address the allocation of risk in the event of casualty, sometimes separately addressing rebuilding responsibilities for losses caused by one party or another. It is of critical importance to identify the responsibility to insure and rebuild tenant improvements; many leases have inconsistent provisions under which both the landlord and tenant's

10 property insurance requirements require insuring improvements located within the leased premises, which can result in confusion, delays and claim adjusting issues in the event of a loss. A. Many lease clauses will trigger different results depending on whether the leased premises are rendered partially damaged or totally damaged, without defining when partial damage becomes total damage. One reading of the "total damage" requirement would be to require structural damage, but structural damage can itself be less than catastrophic. Since many leases grant termination rights to the landlord in the event of "total damage", tenants may be concerned that the termination right for total damage may result in the landlord's cherry-picking of its portfolio. A clear definition of total damage would likely narrow potential disputes and also result in the more timely resolution of insurance claims. 9. Insurance broker review; the Entire Risk Management Scheme: While it is common practice for counsel to send lease insurance requirements (or proposed changes to standard requirements) to our client's insurance advisors for review, this review should extend to the entire risk allocation scheme. The need for a synopsis, diagram or similar summary will depend on the experience and expertise of the insurance team. 10. Emerging trends: Handling risks of Catastrophe and Terrorism A. Flood Coverage (Examples: Aftermath of Hurricanes Irene and Sandy): Unprecedented weather events are hitting in flood and non-flood zones. Landlords and Tenants in all types of retail developments should consider obtaining flood coverage, even for properties located outside of currently designated flood zones. Right now, this is a cost-effective way to reduce risk, but stay tuned, this will change. Although the extent and onset of the impact of climate change is inexact, coastal and low-lying areas will face Flood-related challenges including higher rates, larger deductibles and the prospect of being deemed uninsurable (see certain areas of New Orleans, LA following Hurricane Katrina). Practice Point: Landlords and Tenants should evaluate insuring for flood. Under most retail leases, a Landlord is responsible for maintaining, repairing and restoring the base building and a Tenant is responsible for all of its fit out and ongoing loss of business. (1) Recent Flood Case: Many retail leases go back 20+ years, so flood coverage may not have been required of tenants. Even if a Landlord had coverage, this would typically not cover a tenant s FF&E and loss of business damages. Where tenants did not have insurance, they have had to pay for losses and repairs themselves. In most cases, a lease would not release a Tenant from its obligations or if it did, did so based on the length of time the repairs would take. Keep in mind that damage following a flood is not just property damage. A major source of loss is the clean-up, debris removal, and business interruption. Example: In a New England based shopping center, the government in one state opened a particular dam and six feet of water travelled quickly into another state. Literally a river ran through the center leaving a path of unbelievable damage. The clean up is a huge piece of what needs to be covered, not just what property is worth. (2) Business Interruption for Floods: If a party does not have flood coverage for property damage, then it also does not have it for business interruption. Business interruption coverage is triggered by covered physical losses to insured property. Example: Flood without coverage; business interruption not triggered. B. Terrorism Do you make Landlord/Tenant carry this? (1) Areas as Risk: Is terrorism insurance important for iconic urban areas or suburban areas? Many terrorism experts are opining that due to success at disrupting terror organizations, the risk of attack has diminished but many think a new trend may be to target places in the heartland and not in urban areas. Currently, underwriters add rating loads to certain central business districts including New York, Boston, Chicago and San Francisco. Most other locations are considered non-critical areas from an insurance

11 perspective. However, as soft-targets become a more frequent method of inciting terror, how will carrier rating models adjust based on the location and type of activity? (2) Terrorism Risk Insurance Act (TRIA): As long as TRIA is in effect, terrorism coverage is not expensive. Insurance companies have endorsements to most terrorism coverage that makes it available only as long as government backs it up. Historically, insurance companies have not been required to set up separate pools to cover terrorism risks. Many experts argue that if the insurance companies were required to do so, they would have larger pools to cover risks and the government would not have to play such a large role in back-stopping the risk. Will TRIA continue to be extended? Most experts, expect the answer will be yes although more private market participation is expected to be required by the federal government. C. Autonomous vehicles insurers stand to lose significant premium volume as the vast majority of auto accidents are the result of human error. Carriers will need to find alternative streams of revenue and/or raise rates across other lines of coverage in order to maintain gross written premiums. The authors express their gratitude to Kathleen Nickerson, a Risk Management Consultant for Custom House Risk in Boston, Massachusetts. The authors have each worked with other collaborators in making presentations to ICSC focusing on insurance and allocation of risk, including Jay Byron Leibowitz of Barack, Ferrazzano Kirchbaum & Nagleberg LLP, Chicago, Illinois and Janis K. Cheezem of Akerman LLP, Miami, Florida and express their gratitude to them. All errors and omissions are, however, solely the authors.