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In cell tower leases property owners need to make sure they are protected if things go wrong. Insurance plays a prime role in providing such protection – - both for the property owner and members of the public who could be harmed.
With lease terms now often being for 50 years or more, insurance provisions have to be drafted with this “half century duration” in mind. Three key points in this regard are that:
1. The insurance amount has to be large to start with and has to go up with inflation;
2. The insurance has to be with a financially sound company (not “Fly By Night Insurance Company of the Bahamas Inc.”); and
3. The property owner has to immediately be given notice by the insurance company if the insurance is cancelled or lapses. That way the property owner can immediately demand that the cell tower company either provide replacement insurance or give up the lease.
There are other important insurance provisions, but the bottom line is that a well drafted insurance portion of a cell tower lease that could last 50 years should be about one page long. Our model cell tower lease, available at www.varnumlaw.com/lease, has insurance provisions taken from actual leases that meet the preceding requirements and provide related protections as well.
© 2012 Varnum LLP
