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Data center insurance coverage may lag behind tenant SLAs
Sedgwick says contracts between operators and tenants can allocate outage and equipment losses in ways that do not match the facility insurance purchased.
As US data center construction accelerates, Sedgwick reports an insurance risk that is tied to contractual obligations, not just physical hazards. In particular, service level agreements between data center operators and tenants can assign responsibility for outages, damaged equipment, and service failures differently than the terms of an operator’s insurance policy.
According to Ronald Murchek, an executive general adjuster at Sedgwick, policies often spell out that the building owner or data center owner covers facility property, while tenants are responsible for their own equipment. But Murchek says the tenant agreement can be written differently, leading to a negotiation or “back and forth” when claims and coverage responsibilities do not line up.
Sedgwick’s concern comes as data center buildouts reach record levels, with CBRE reporting 7,481.1 megawatts of data center capacity under construction across eight markets it categorizes as North America.