Understanding Improvements and Betterments: Be Mindful of Lease and Insurance Provisions

“Improvements and betterments” typically are defined as fixtures, alterations, additions or installations made a permanent part of a building by and at the expense of the tenant, which may not legally be removed. These improvements become the property of the landlord or building owner, except that ordinarily under most leases, the tenant is responsible for repairing or replacing the improvements in the event of loss. The term“improvements” has been defined in a variety of ways. An improvement is anything that adds to the value of property; it changes, A retailer leases a storefront andmakes considerable improvements to adapt the facility for selling and servicing its products. A fire breaks out and heavily damages the building, including the features the retailer added. Suddenly, those improvements, which were contributing to the success of both the retailer and landlord, are the focus of questions: whose property were they, who is responsible for repairing the damages, and how are those determinations made? While “improvements and betterments” seem like simple concepts, understanding them in the context of insurance coverage or a lease provision can be anything but. That’s the subject insurance expert Robert Prahl addresses in this issue of Adjusting Today. Mr. Prahl discusses how courts have ruled in relevant cases, and outlines the applicable language found in standard policy forms. Ultimately, he explains the importance of understanding the insurance ramifications of improvements and betterments, and how they can impact the businesses involved. Sheila E. Salvatore Editor ADJUSTING TODAY FROM THE EDITOR Understanding Improvements and Betterments: Be Mindful of Lease and Insurance Provisions By Robert J. Prahl, CPCU Adjusters International Disaster Recovery Consulting