What is the minimum limit for tenant's legal liability insurance required for an Extreme Art Studio?
Extreme_Art_Studio Franchise · 2024 FDDAnswer from 2024 FDD Document
Insurance
In addition to the purchases or leases described above, you must also obtain and maintain, at your own expense and from carriers who maintain a Best's Financial Strength rating of "A-/VIII" or above, the minimum insurance coverage that we periodically require under the Franchise Operations Manual, including: comprehensive general liability insurance with minimum limits of $1,000,000 per occurrence and at least $2,000,000 aggregate; automobile liability including owned (if applicable), hired and nonowned vehicle coverage and property damage liability with at least $1,000,000 combined single limit, and $1,000,000 general aggregate limit; product liability insurance with limits of at least $2,000,000 general aggregate including the following coverages: personal injury (employee and contractual inclusion deleted); products/completed operation; assault and battery; terrorism; and tenant's legal liability with limits of at least $300,000; builders' risk during renovation and/or construction; worker's compensation and employers liability insurance of $500,000/$500,000/$500,000; all risk coverage insurance on (1) all personal property covering the Extreme Art Studio Business and contents thereof, including, without limitation, all supplies, inventory, fixtures, and equipment, containing a replacement value endorsement in an amount equal to the full replacement value thereof; and (2) business interruption insurance for actual loss the Extreme Art Studio Business sustains for 12 months, or not less than fifty percent (50%) of annual Net Sales; and other types of insurance, in the amounts, required by applicable law, rule, regulation, ordinance or licensing requirements or your lease,
Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 23–26)
What This Means (2024 FDD)
According to Extreme Art Studio's 2024 Franchise Disclosure Document, franchisees are required to maintain tenant's legal liability insurance with a minimum limit of $300,000. This insurance coverage is part of a broader set of insurance requirements that Extreme Art Studio mandates for its franchisees. These requirements are put in place to protect both the franchisee and the franchisor from potential liabilities and financial losses.
In addition to tenant's legal liability, Extreme Art Studio franchisees must also secure other types of insurance, including comprehensive general liability insurance with minimum limits of $1,000,000 per occurrence and at least $2,000,000 aggregate, automobile liability insurance with at least $1,000,000 combined single limit, and product liability insurance with limits of at least $2,000,000 general aggregate. They also need to carry worker's compensation insurance, all-risk coverage for personal property, and business interruption insurance. The franchisor also notes that they or applicable law may periodically increase the amounts of coverage required under these insurance policies and/or require different or additional insurance coverages.
It is important to note that Extreme Art Studio requires franchisees to obtain insurance from carriers with a Best's Financial Strength rating of "A-/VIII" or above. The insurance company must be authorized to do business in the state where the Extreme Art Studio Business is located and must be approved by the franchisor. Furthermore, Extreme Art Studio and any affiliates they designate must be named as additional insureds on each policy, and the policies must include a waiver of subrogation rights against Extreme Art Studio and its affiliates. Franchisees must provide certificates of insurance to Extreme Art Studio at least 30 days prior to opening and as routinely requested.
Prospective franchisees should carefully review the insurance requirements outlined in the Franchise Disclosure Document and consult with an insurance professional to ensure they can obtain the necessary coverage at a reasonable cost. Failing to maintain the required insurance coverage could result in a breach of the franchise agreement and potential termination of the franchise.