Common Area Insurance: CAM Line Item Audit Guide

What Common Area Insurance Covers

Common area insurance covers the landlord's property and general liability exposure for shared spaces including lobbies, parking lots, and mechanical rooms. Under NNN and modified gross leases, tenants typically reimburse their pro-rata share of the annual premium. The legitimate recoverable cost is limited to the actual premium attributable to this building and its common areas. Problems arise in two main ways. First, landlords pass insurance deductibles through as operating expenses when claims occur. Deductibles are a direct consequence of the landlord's policy election to lower premiums by accepting higher out-of-pocket loss exposure. That is a landlord financial decision, not a building operating cost. Second, landlords with multiple properties sometimes allocate their entire portfolio premium to a single building or apportion it inaccurately, producing a higher per-SF charge than the actual policy supports. Tenants should request the insurance certificate and premium invoice each year, confirm coverage is restricted to the subject property, and verify the allocation methodology. If your lease excludes deductibles from CAM, as most well-drafted leases do, any deductible recovery attempt is directly disputable.