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Section 8: Insurance and Bonds

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Each lease requires the lessee to carry commercial general liability insurance insuring against injury and damage during the lease term. In certain cases, depending on the use, the lessee may be required to carry additional insurance such as environmental or liquor liability. Specific coverages are described in the liability insurance provisions in the lease. All liability insurance policies must be with companies licensed by the Texas Department of Insurance and must include the following endorsements:

  • TxDOT is to be included as an additional insured
  • a waiver of subrogation in favor of TxDOT
  • a thirty day notice of cancellation to TxDOT if the insurance is cancelled.

The lessee must furnish TxDOT with a certificate of insurance providing the required coverage. When reviewing the certificate, the department should check that the minimum dollar amounts of the required coverage are met and that the endorsements described above are included in the policy.

If improvements will be constructed under a lease, the lessee must furnish TxDOT with a surety bond as security to ensure that, upon expiration of the lease, the lessee will fulfill its obligation to remove the improvements. The amount of the bond should be for the cost of removing the improvements as estimated by an engineer with the department. As referenced above, the department will need to include this amount in the “Security for Removal” provision when drafting the lease form.

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