A recent decision, Fort Worth Partners, LLC v. Nilfisk, Inc., 1 should make every landlord, tenant, commercial property manager, and commercial and real estate attorney read leases carefully. Insurance obligation clauses are important, and there are a number of lessons from this case. The facts are simple, but the consequences are staggering.
A tornado leveled a 200,000-square-foot industrial building in Arkansas. The tenant, Nilfisk, had agreed to carry “all-risk” property insurance equal to the full replacement cost of the premises. Yet, neither the tenant nor the landlord ever determined what that replacement cost actually was. When the storm hit, Nilfisk’s coverage fell short by millions. What followed was a hard lesson in the importance of precision and accountability when it comes to insurance obligations in commercial leases.
This case reveals how many parties treat insurance provisions as boilerplate, something to skim past while focusing on rent, term, and renewal rights. Too often, landlords accept a certificate of insurance and assume it’s good enough. Tenants forward the lease to their insurance broker with a vague instruction to “make sure we’re covered.” That complacency is dangerous.
Nilfisk’s coverage was about half of what it should have been. When the tornado destroyed the building, the shortfall became a multimillion-dollar breach of contract. The landlord sued, and while it prevailed on liability, it still endured years of litigation and incomplete recovery. The primary lesson is that vague promises about insurance coverage can be as destructive to a business as the wind itself.
For landlords, this case highlights the need to be proactive rather than passive. The lease actually gave the landlord the right to obtain the correct coverage and bill the tenant for the cost. Yet that safeguard was never used. The landlord accepted insurance certificates for years without checking whether they met the “full replacement cost” requirement. That was a missed opportunity to prevent disaster.
Landlords and their property managers should make it a practice to verify the adequacy of their tenants’ insurance every year. Replacement costs change. Building values rise. What was adequate five years ago may be woefully insufficient today. Relying on a certificate of insurance, which is essentially a piece of paper with limited information, is not enough. The true measure of diligence is to demand copies of the policy, review the limits, and, if necessary, purchase the supplemental coverage allowed under the lease and charge it back to the tenant.
Tenants also have a vital lesson to learn. When a lease obligates them to insure the landlord’s building rather than just their own equipment or improvements, the tenant is taking on a massive responsibility. The obligation to carry insurance is not a suggestion. It’s a binding contractual promise.
A tenant that fails to meet it can be held liable for the uninsured loss, even if the event was entirely accidental. Nilfisk’s mistake was not one of bad faith but of misunderstanding. The company thought it had enough insurance. It did not. The result was a breach of contract and millions of dollars in damages.
Commercial tenants should always engage experienced insurance professionals who understand lease obligations and can match coverage to those requirements. “We thought we were covered” is not a defense when the policy falls short. Send the insurance professional a copy of the lease and demand that they agree to obtain the insurance required under the lease.
Real estate or commercial attorneys should take particular note of this decision. The words they choose when drafting leases have real-world consequences. Ambiguities in insurance clauses lead directly to lawsuits like this one. The phrase “less the cost of footings, foundations, and other structures below grade” sounds innocuous enough until a judge is asked to decide whether “below grade” means below ground or includes parts of the foundation at ground level. Clarity is not an aesthetic preference. It’s a professional obligation.
Lawyers must define replacement cost precisely, specify how it will be determined and updated, and ensure their clients understand how to monitor compliance over the life of the lease. Advising a client to review these obligations annually with both legal and insurance professionals should be standard practice, not an afterthought.
The broader truth here is that insurance is not a side note to a business deal. It is the silent promise that allows commerce to function. When parties neglect that promise, the entire structure, legal, financial, and physical, can collapse.
Insurance provisions in leases are not filler paragraphs. They are the clauses that decide who survives the storm. A landlord who fails to verify coverage and a tenant who fails to maintain it are both betting against the weather. That’s not business. That’s gambling.
Thought For The Day
“It’s the little details that are vital. Little things make big things happen.”
John Wooden
1 Fort Worth Partners v. Nilfisk, Inc., No. 24-3224 (8th Cir. Oct. 17, 2025).
