Contract Risk Management for Airport Agreements (2016)

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17 A. The City [Owner] has the right to terminate this Agree- ment, in whole or in part, without cause, on thirty (30) days written notice to the Contractor, and with cause on ten (10) days written notice to the Contractor. However, nothing herein shall be construed as giving the Contractor the right to perform services under this Agreement beyond the time when such services become unsatisfactory to the Manager. B. If this Agreement is terminated by the Contractor, or if this Agreement is terminated by the City for cause, the Contractor’s compensation in such event shall be limited to (1) the sum of the amounts contained in invoices which it has submitted and which have been approved by the City, (2) the reasonable value to the City of the work which the Contractor performed prior to the date of the termination notice, but which had not yet been approved for payment, and (3) the cost of any work which the Manager approves in writing which he determines is needed to accomplish an orderly termination of the work. If this Agreement is termi- nated for the convenience of the City and without the fault of the Contractor, the Contractor shall also be compensated for any reasonable costs it has actually incurred in perform- ing services hereunder prior to the date of the termination. C. If this Agreement is terminated, the City shall take pos- session of all materials, equipment, tools and facilities owned by the City which the Contractor is using by what- ever method it deems expedient, and the Contractor shall deliver to the City all drafts or other documents it has com- pleted or partially completed under this Agreement, together with all other items, materials and documents which have been paid for by the City, and these documents and materials shall be the property of the City. D. Upon termination of this Agreement by the City, the Con- tractor shall have no claim of any kind whatsoever against the City by reason of such termination or by reason of any act incidental thereto, except for compensation for work sat- isfactorily performed as described herein. E. The Contractor has the right to terminate this contract with cause by giving not less than thirty (30) days prior written notice to the City. See Appendix C-5, Denver International Airport. Appendix C-5 provides a survey of additional con- tractual provisions used by other airports to address extension and termination. Methods to Contractually Mitigate Risk The following are key issues to consider when drafting or reviewing a contractual provision related to extension and termination: • Avoid automatic, indefinite extensions. • Provide for immediate termination by owner for cause and identify those causes. Insurance Commercial general, automobile, workers’ com- pensation, and employer’s liability policies should be mandatory. For each category of insurance, the owner should assess the risks and the value of pro- tected assets and equipment or the magnitude of possible loss in setting coverage minimum amounts. A CGL policy checklist should: 1. Ensure that coverage limits (per occurrence and aggregate) are commensurate with asset value and risk. 2. Evaluate a monetary limit on a self-insured retention policy or deductible without separate owner approval. 3. Ensure that the airport owner is identified as an “Additional Insured” on a primary and noncon- tributory basis under the policy, thus having direct rights of action against the carrier. 4. Ensure that all required insurance policies provide that they are the primary insurance with respect to any other valid insurance the owner may possess and that in any circumstance, the owner’s insurance policy will be considered excess insur- ance only. D. Tenant and User Agreements Tenant and user agreements set the parameters under which various airline and nonairline opera- tors are allowed to occupy, develop, and use space at the airport, subject to FAA guidances and grant assurances. These agreements run the gamut from rights of entry, easements, basic space and use agreements (often licenses), and long-term hangar or warehouse leases to Fixed Base Operator (FBO) agreements, fueling leases, developer agreements for those developing and leasing space at the air- port, and standard commercial operator leases. Because tenant and user agreements cover such a broad range of uses, they often vary greatly in the type and depth of risk and liability issues that need to be addressed.4 Although the specific use of any airport tenant or user will have a major impact in analyzing the appropriate risk management provi- sions in a given agreement, some of the more pre- dominant risks, coverages, and ways to allocate or limit risk are discussed below. Identification of Risk 1. Occupancy Liability and Indemnity.—Regard- less of the type of tenant or user agreement, the tenant should remain liable for occurrences related to its occupancy or any negligence by the tenant or any tenant parties (employees, contractors, agents, 4 ACRP Report 47: Guidebook for Developing and Leasing Airport Property, TransporTaTion research Board (2011), http://onlinepubs.trb.org/onlinepubs/acrp/acrp_rpt_ 047.pdf, provides an in-depth discussion on key issues asso- ciated with leasing airport land and summarizes best prac- tices. Key issues in concession agreements and multiple use facility contracts are also addressed by ACRP Report 33: Guidebook for Developing and Managing Airport Contracts, TransporTaTion research Board (2011), http:// onlinepubs.trb.org/onlinepubs/acrp/acrp_rpt_033.pdf.

18 licensees, etc.). The agreement should include broad language in which the tenant agrees to hold harm- less and indemnify the airport, its officers, board, employees, and representatives from and against any loss (including all costs for investigation and defense of any litigation) that may be incurred by the airport to the extent that such loss 1) resulted from or arose out of the construction, use, occupancy or maintenance of the premises, the tenant’s operations thereon, or the acts or omissions of the tenant, result- ing in damage to or destruction of any property or injury to or death to any person; 2) arose out of any breach of the lease by the tenant; or 3) was imposed on or assessed against the airport arising out of any act or omission on the part of the tenant or any other person acting by, through, or for the tenant. Example/Sample Provision The following is an example of how indemnifica- tion may be addressed to mitigate risk in a tenant/ user agreement: 8.02 INDEMNIFICATION The Airline agrees to indemnify and save harmless the City, its officers, and employees, from and against (A) any and all loss of or damage to property, or injuries to, or death of, any person or persons, including property and officers, employ- ees and agents of the City; and (B) all claims, damages, suits, costs, expense, penalties, liability, actions or proceed- ings of any kind or nature whatsoever, of or by anyone whomsoever; which, with respect to clauses (A) and (B) hereof, in any way result from, or arise out of, Airline’s oper- ations in connection herewith, or its use or occupancy of any portion of the Airport and the acts, omissions, or wrongful conduct of officers, employees, agents, contractors or sub- contractors of the Airline including without limitation, the provision or failure to provide security as herein required and the use, disposal, generation, transportation or release of pollutants, including but not limited to oil, glycol, toxic or hazardous materials at Denver International Airport by the Airline, its contractors, employees, agents, customers, or anyone claiming or acting by or through the Airline. Airline further agrees that if a prohibited incursion into the Air Operations Area occurs, or the safety or security of the Air Operations Area, the Airfield, the Baggage System or other sterile area safety or security area is breached by or due to the negligence or willful act or omission of any of Airline’s employees, agents, or contractors and such incur- sion or breach results in a civil penalty action being brought against the City by the U.S. Government, Airline agrees to reimburse the City for all expenses, including attorney fees, incurred by the City in defending against the civil penalty action and for any civil penalty or settlement amount paid by the City as a result of such incursion or breach of airfield or sterile area security. The City shall notify Airline of any allegation, investigation, or proposed or actual civil penalty sought by the U.S. Government for such incursion or breach. Civil penalties and settlement and associated expenses reimbursable under this Paragraph include but are not limited to those paid or incurred as a result of violation of Federal Aviation Administration (FAA) regulations or Transportation Security Administration (TSA) regulations, as they may be amended, or any similar law or regulations intended to replace or compliment [sic] such regulations. Without limitation, the terms of this indemnity include an agreement by Airline to indemnify, defend and hold harm- less the City from and against any and all expense, loss, claim, damage, or liability suffered by City by reason of Air- line’s breach of any environmental requirement existing under federal, state or local law, regulation, order or other legal requirement in connection with any of Airline’s acts, omissions, operations or uses of property relating to this Agreement, or such a breach by the act or omission of any of Airline’s officers, employees, agents, or invitees, whether direct or indirect, or foreseen or unforeseen, including (but not limited to) all cleanup and remedial costs actually and reasonably incurred to satisfy any applicable remediation obligation required by federal, state or local law, and rea- sonable legal fees and costs incurred by City in connection with enforcement of this provision, but excluding damages solely relating to diminution in value of City real property. Provided however, the City agrees that (I) the Airline need not save harmless or indemnify the City against damage to or loss of property, or injury to or death of persons, caused by the negligence or willful acts of the City, its officers, employ- ees, contractors and agents, and (II) the City will give prompt written notice to the Airline of any claim or suit and the Airline shall have the right to assume the defense and compromise or settle the same to the extent of its own inter- est. Provided, however, the indemnity provided for herein shall apply only to the extent the City is not reimbursed out of insurance proceeds. See Appendix D-1, Denver International Airport. Appendix D-1 provides a survey of additional con- tractual provisions used by other airports to address occupancy liability. Methods to Contractually Mitigate Risk The following are key issues to consider when drafting or reviewing a contractual provision related to occupancy liability: • The language must be broad enough to encom- pass the current tenant/user, its subtenants, and the respective employees, contractors, agents, licensees, successors, and assigns claiming by and through such parties. • If the lease allows leasehold financing, the leasehold mortgagee will often seek to take free of any lease obligations or liabilities in the event of a leasehold mortgage foreclosure or assignment to the lender or third-party successor in lieu of fore- closure. The lease language must be binding upon such assignees without waiving any existing claim against the original tenant. • In negotiation of leases, airports and tenants may offset up-front costs and burdens to the tenant by providing other remedies in the leases, which may include “self-help” rights to the airport (see further discussion in the following remedies upon default section). Airports should also take into

19 consideration the creditworthiness of tenants and may adjust charges and required security and insurance accordingly based on their analysis of the risk. In such analysis, when allowed by appli- cable law, airports may allow self-insurance of certain risks in a given circumstance, such as when the tenant/user is a governmental entity or has an extremely high net worth or when the tenant has a significant investment in on-airport improvements that will vest in the airport. 2. Maintenance and Repair.—The airport should generally pursue a net lease or at least establish bright-line limitations of the airport’s liability for maintaining and repairing the structural portions of the building or any improvements, regardless of cause. The parties must also address obligations to restore the leased premises after casualty loss and allow the airport to act without written notice in the event of an emergency. The agreement should also address general obligations for security and compli- ance with laws and other obligations imposed by FAA or others having jurisdiction over the premises. Example/Sample Provision The following is an example of how a tenant’s maintenance and repair obligations may be addressed to mitigate risk in a tenant/user agreement: 9. MAINTENANCE AND REPAIR 9.2 Tenant’s Maintenance Obligations. Tenant, at all times during the Term and at Tenant’s sole cost and expense, shall keep the Premises and every part thereof in good condition and repair, and in compliance with applicable Laws, including the replacement of any facility of City [Owner] used by Ten- ant which requires replacement by reason of Tenant’s use thereof, excepting (a) ordinary wear and tear, and (b) damage due to casualty with respect to which the provisions of Section 14 [Damage or Destruction] shall apply. Tenant hereby waives all right to make repairs at the expense of City or in lieu thereof to vacate the Premises as provided by California Civil Code Section 1941 and 1942 or any other law, statute or ordi- nance now or hereafter in effect. In addition, if it becomes rea- sonably necessary during the term of this Lease, as determined by Director, Tenant will, at its own expense, redecorate and paint fixtures and the interior of the Premises and improvements, and replace fixtures, worn carpeting, cur- tains, blinds, drapes, or other furnishings. Without limiting the generality of the foregoing, at all times, Tenant shall be solely liable for the facade of the Premises separating the Premises from the Terminal common areas, including the external face thereof, all windows and display areas therein, and all finishes thereon. As provided below in Section 15.4 [City’s Right to Perform], in the event Tenant fails to perform its maintenance and repair obligations hereunder, City shall have the right to do so, at Tenant’s expense. The parties acknowledge and agree that Tenant’s obligations under this Section are a material part of the bargained-for consideration under this Lease. Tenant’s compliance obligations shall include, without limitation, the obligation to make substan- tial or structural repairs and alterations to the Premises (including the Initial Improvements), regardless of, among other factors, the relationship of the cost of curative action to the Rent under this Lease, the length of the then remaining Term hereof, the relative benefit of the repairs to Tenant or City, the degree to which curative action may interfere with Tenant’s use or enjoyment of the Premises, the likelihood that the parties contemplated the particular requirement involved, or the relationship between the requirement involved and Tenant’s particular use of the Premises. No occurrence or sit- uation arising during the Term, nor any present or future requirement, whether foreseen or unforeseen, and however extraordinary, shall relieve Tenant of its obligations hereun- der, nor give Tenant any right to terminate this Lease in whole or in part or to otherwise seek redress against City. Tenant waives any rights now or hereafter conferred upon it by any existing or future requirement to terminate this Lease, to receive any abatement, diminution, reduction or suspen- sion of payment of Rent, or to compel City to make any repairs to comply with any such requirement, on account of any such occurrence or situation. See Appendix D-2, San Francisco International Airport. Appendix D-2 provides a survey of additional con- tractual provisions used by other airports to address maintenance and repair. Methods to Contractually Mitigate Risk The following are key issues to consider when drafting or reviewing a contractual provision related to maintenance and repair: • It will be important to define and delineate the limits of the airport’s obligations for any structural maintenance, repairs, or replacements. This includes who is responsible for improvements on-premises and off-premises. • The airport should limit liability for main- tenance, repair, or replacement of any facilities maintained by or under the control of third parties, such as public or private utilities, and for matters of force majeure. • In particular regard to casualty insurance, the airport should obtain waivers of subrogation from the tenant and its insurers. 3. Buildout.—If the tenant is performing a build- out, this opens a broad range of risk management issues that must be addressed by the airport land- lord. When the tenant is responsible for construc- tion, the airport should retain rights of plan and permit approval and inspection and approval of con- struction while making it clear that through the exercise of such rights, the airport does not incur any liability for ultimate design or construction of the improvements. With regard to any airport build- out, the lease should establish very strict provisions for punch-list repair of any defects and a strict and short duration period (if any) for the airport’s liabil- ity to the tenant for the condition of the airport’s premises improvements. The lease should ideally

20 provide that if the tenant takes possession, it is deemed to have accepted the premises “as is.” The agreement should also address general obligations for security and compliance with laws and other obligations imposed by FAA or others having juris- diction over the premises. Example/Sample Provision The following is an example of how a tenant’s buildout due diligence obligations may be addressed to mitigate risk in a tenant/user agreement: Within thirty (30) days from the date of the execution of this Lease, Concessionaire shall submit to Board the final plans and specifications for the construction of Conces- sionaire’s location in accordance with Board’s current design criteria. Concessionaire shall commence construc- tion of said project within thirty (30) days from the date Board approves Concessionaire’s plans and issues its per- mit and construction approval letter to Concessionaire, and Concessionaire shall diligently proceed with construc- tion so as to complete said project and open for business on or before 90 days from issuance of the approval letter. Con- cessionaire acknowledges that the financial success of the Airport depends, in part, on both (i) the completion of the construction, remodel and renovation of the Premises as herein required; and, (ii) Concessionaire’s opening for business in a timely manner, and that Board’s damages arising from Concessionaire’s failure to do so are extremely difficult and impracticable to fix. Therefore, should Con- cessionaire fail to either complete said project as required or open the Premises for business as required, Concession- aire shall pay to Board as liquidated damages and not as a penalty, upon receipt of invoice, the sum of Two hundred Fifty Dollars ($250.00) per day per any and all locations not in compliance. Concessionaire agrees that said amount of Two hundred Fifty Dollars per day per location is fair compensation to Board for said liquidated damages. See Appendix D-3, Dallas/Fort Worth International Airport. Appendix D-3 provides a survey of additional contractual provisions used by other airports to address buildout. Methods to Contractually Mitigate Risk The following are key issues to consider when drafting or reviewing a contractual provision related to buildout: • The lease must make clear which party is responsible for each element of design, permitting, and construction of improvements and to what extent the other party has review or approval rights. The airport should retain final rights of approval. • The airport should also retain reasonable rights of approval of the tenant’s contractors and subcontractors. In addition, see the following dis- cussion regarding issues of liability, builder’s risk and other insurance coverages, and payment and performance bonds that should be required for any tenant buildout. 4. Remedies for Default.—For a monetary default, the airport should always reserve all rights avail- able to it pursuant to state law, which usually include the options of terminating the lease and retaking possession or terminating tenant’s right to possession, retaking possession, and recovering the unpaid rent as it becomes due, without terminating the lease. In some instances, the airport will be able to accelerate rent due until the end of the lease term, but it will usually be discounted to present value. If a tenant has incurred a nonmonetary default, the airport should have the right to cure the default on the tenant’s behalf and to “monetize” the claim by collecting the cost of such performance as additional rent payable under the lease. If the tenant fails to pay the additional rent in a timely manner, the air- port can then claim a monetary default and pursue any other remedies allowed under the lease or at law, including eviction. The airport should also have an express reservation of the airport’s right to pur- sue litigation for damages of not only the rent and additional rent, but also costs incurred in retaking, restoring, and reletting the premises, including attorney’s fees and costs. Example/Sample Provision The following is an example of how remedies upon default may be addressed to mitigate risk in a tenant/user agreement: Article 13 City Remedies 13.03 Remedies. Upon the occurrence of any event enumer- ated in Section 13.01 and after any applicable notice and cure periods, the following remedies shall be available to City: 13.03.1 City may exercise any remedy provided by law or in equity, including but not limited to the remedies hereinafter specified. 13.03.2 City may cancel this Agreement, effective upon the date specified in the notice of cancellation. Upon such date, Operator shall be deemed to have no further rights hereun- der and City shall have the right to take immediate posses- sion of the Operator Premises. 13.03.3 City may reenter the Operator Premises and may remove all Operator persons and property. Upon any removal of Operator property by City hereunder, Operator property may be stored at a public warehouse or elsewhere at Operator’s sole cost and expense. 13.03.4 City may relet Operator Premises and any improve- ments thereon or any part thereof, at such rentals, fees, and charges and upon such other terms and conditions as City, in its sole discretion, may deem advisable, with the right to make alterations, repairs of improvements on said Opera- tor Premises. 13.03.5 In the event that City relets Operator Premises, rentals, fees, and charges received by City from such relet- ting shall be applied: (i) to the payment of any indebtedness, other than rentals, fees, and charges due hereunder, from Operator to City; (ii) to the payment of any cost of such

21 reletting; and (iii) to the payment of rentals, fees, and charges due and unpaid hereunder. The residue, if any, shall be held by City and applied in payment of future rentals, fees, and charges as the same may become due and payable hereunder. If that portion of such rentals, fees, and charges received from such reletting and applied to the payment of rentals, fees, and charges hereunder is less than the rentals, fees, and charges as would have been payable during appli- cable periods by Operator hereunder, then Operator shall pay such deficiency to City whenever rentals, fees or charges are due to City hereunder. Operator shall also pay to City, as soon as ascertained, any reasonable costs and expenses incurred by City in such reletting not covered by the rent- als, fees, and charges received from such reletting. 13.03.6 No reentry or reletting of Operator Premises by City shall be construed as an election on City’s part to can- cel this Agreement unless a written notice of cancellation is given to Operator. See Appendix D-4, Salt Lake City International Airport. Appendix D-4 provides a survey of additional con- tractual provisions used by other airports to address remedies for default. Methods to Contractually Mitigate Risk The following are key issues to consider when drafting or reviewing a contractual provision related to remedies for default: • Airports should be clear that the exercise of any remedy is not exclusive of other remedies. The lease should also include clear “non-waiver” language so that any concession to the tenant, acceptance of part payment or performance, or fail- ure to immediately exercise any rights or remedies by the airport is not deemed to waive a default or create a satisfaction and accord. • Airports must be mindful of state and local landlord tenant statutes or ordinances, and even bankruptcy, which may prescribe or limit a land- lord’s rights or remedies in a given circumstance. • As previously noted, leasehold mortgagees will often seek to limit the rights and remedies of the landlord in the event of a leasehold mortgage fore- closure or sale or assignment in lieu of foreclosure. Airports should be careful that rights and remedies apply to any occupant/use under the lease and that they do not limit, waive, or modify any rights or remedies in the lease or any subsequent tenant- or lender-requested estoppels or consents. Lenders will often seek to rewrite lease terms in such documents. 5. Hazardous Materials.—Tenants/users engaged in fueling, aircraft maintenance, and other uses that involve hazardous or environmentally regulated substances should be required to provide explicit, separate environmental indemnities to the airport. These provisions are often hotly contested, especially in brownfield airport locations, and may require very detailed language and procedures for the parties to establish an environmental baseline condition at the beginning of the lease term, a formal system for auditing environmental conditions during the term, and a method for determining the condition upon expiration or termination of the lease term. The users may similarly have to address procedures for monitoring and/or remediation and the impact on possession and use during the term of the lease. The lease should permit the airport to recover the cost of any remediation as additional rent. This may require parties to address liability for loss of rent and the necessity for the tenant/user to maintain business interruption insurance coverage. The lease language should limit the airport’s environmental liability only to actual damages caused to the tenant by envi- ronmental contamination caused by the airport. The airport should not separately contractually obligate itself to environmental remediation obligations or indemnify the tenant against environmental condi- tions caused by third parties. Example/Sample Provision The following is an example of how a baseline audit related to hazardous materials may be addressed to mitigate risk in a tenant/user agreement: 8.04 Baseline Audit: The County has provided Lessee with a copy of an environmental audit of the Premises, conducted to identify any Recognized Environmental Conditions associ- ated with the Premises, which audit may include analyses of soil and groundwater samples (the initial “Baseline Audit”). Except to the extent Lessee previously occupied the Prem- ises, the County shall be responsible for any Recognized Environmental Conditions within the meaning of ASTM E 1527-05, or most recent version, disclosed by the Baseline Audit. Except to the extent Lessee previously occupied the Premises, Lessee may terminate this Agreement within sixty (60) days of receipt of the Baseline Audit if Lessee, in its sole discretion, determines that the Recognized Environmental Conditions disclosed in such Baseline Audit are unaccept- able. To the extent Lessee previously occupied the Premises, Lessee, subject to its right to invoke the dispute resolution provision of 8.15, shall be responsible for all Recognized Environmental Conditions disclosed in the Baseline Audit, which are not otherwise Baseline Environmental Conditions, unless Lessee demonstrates to the County’s satisfaction that the Recognized Environmental Conditions originated from (1) a discharge, disposal or release outside of the Premises, unless such discharge, disposal or release was caused by Les- see, Lessee’s agents employees, contractors or invitees; or (2) a discharge, disposal or release of Hazardous Material on the Premises prior to Lessee’s first occupancy of the Premises and not caused by Lessee, Lessee’s agents, employees, con- tractors, invitees, or Trespassers. See Appendix D-5, Miami International Airport. Appendix D-5 provides a survey of additional con- tractual provisions used by other airports to address hazardous materials.

22 Methods to Contractually Mitigate Risk The following are key issues to consider when drafting or reviewing a contractual provision related to hazardous materials: • Tenants will usually seek to limit liability to matters caused by the tenant during the term of the lease. The lease should have language to estab- lish the baseline environmental condition at the commencement of the lease and the condition upon expiration or earlier termination of the lease. The airport should not assume any liability for damag- es or cleanup costs caused by an environmental condition caused by a third party (unless, perhaps, if environmental laws may already impose such obligations on the airport). • Airports should require that the tenant has an affirmative duty to inspect, report, and reme- diate, if necessary, any recognized environmental condition that arises on the premises from time to time. The airport should also reserve the right to inspect the premises and conduct environmental testing or remediation as may be required or that the airport deems appropriate from time to time during the term. • Environmental risk may vary widely accord- ing to the proposed use and may be mitigated through the purchase of pollution insurance, as discussed in the following section. Insurance and Bonds Each lease or user agreement will require partic- ular types of insurance and bonds based on the pro- posed use, rights, and obligations under the agreement. Note that specialized airport uses will require broader and more in-depth analysis of the risk, insurance, and indemnity obligations. For example, tenants/users or their licensees operating in an Aircraft Operations Area (AOA) will likely require additional coverages, aviation liability insurance, and much higher coverage limits. Inter- national carriers may be required to have terrorism risk coverage as well. Because insurance requirements and regulations will vary based on state law and the type of use, it is important to involve insurance and risk manage- ment consultants when reviewing contractual provi- sions and evidence of coverage. Certain federal or state regulations or grants may also require airports to include specific additional coverages or security. Some of the typically required documents and cover- ages are as follows: a. Insurance.—All coverages should name the air- port as an additional insured on a primary and non- contributory basis and should include waivers of subrogation language. Tenants need to provide copies of the policies (not just certificates) upon request. The policies should also have limited deductibles or self-insurance provisions in most cases. When permitted by law, airports may consider allowing self-insurance of certain risks in given cir- cumstances, such as when the tenant/user is a gov- ernmental entity, has an extremely high net worth, or has a significant investment in on-airport improvements that will vest in the landlord. Airport landlords should always maintain the right to review and approve any insurance policy and require changes in coverage when necessary. 1. CGL Policies (Wrap Policies).—Almost all agreements will require the tenant/user and any other party operating under the tenant/user’s rights to maintain CGL insurance in a per-occurrence cov- erage amount adequate to protect the landlord. Usu- ally coverage of at least $5 million is required for users having AOA access. 2. Vehicle Coverage for Owned and Nonowned Vehicles.—There should be separate automobile lia- bility insurance required for all automobiles, whether owned or nonowned, used in connection with the tenant/user’s operations, with a Combined Single Limit covering each motor vehicle operated on the premises. Typically, this coverage will be at least $1 million. Higher limits may be required for any vehicles operating within the AOA. 3. Workers’ Compensation. —Most leases (and usually federal or state requirements) will impose an obligation for tenants/users to maintain workers’ compensation or similar insurance that affords the required statutory coverage and requisite statutory limits. Coverages are often at least $500,000 for each of the “each accident,” “disease policy limit,” and “disease each employee coverage” categories, or a tenant/user can maintain a self-insured program with comparable coverage. 4. Construction-Related Coverage.—For any tenant/user who performs construction on site, the agreement should require builder’s risk coverage. Builder’s risk is a property insurance policy that is designed to cover property during the course of con- struction, usually on an all-risks basis. The estimated completed value of the project is generally used as the limit of the builder’s risk coverage. The airport must carefully review the tenant’s insurance obliga- tions and compliance. In general, it will not be adequate just to require baseline coverages and cer- tificates of insurance. In a net lease for improved property, the tenant/user can be required to maintain broad-form casualty coverage for all the improve- ments on the premises. Airports should require the