As the US data center construction boom accelerates, a less visible insurance exposure is emerging alongside the physical risks: contractual obligations that may extend beyond what an operator’s policy actually covers.
Service level agreements, or SLAs, between data center operators and their tenants can create responsibilities for outages, damaged equipment and service failures that do not necessarily align with the insurance purchased for the facility, according to Ronald Murchek (pictured), executive general adjuster at Sedgwick.
“A lot of times the policies will say the building owner or data center owner is responsible for the building owner’s or data center owner’s property, and then the tenant or customers are responsible for their own equipment,” Murchek said.
“But then you get into the service level agreement between the tenant and the data center, and it’s written a little differently. Then you have a bit of back and forth.”
Concern over insurance gaps comes as significant as data center construction reaches record levels across major US markets.
CBRE reported 7,481.1 megawatts of data censer capacity under construction across the eight markets it classifies as North America’s primary markets — all of them in the US — during the first half of 2026. That was up 24.8% from a year earlier and surpassed the previous construction peak recorded in 2024. More than 80% of that capacity had already been preleased.
At the same time, development is spreading beyond established hubs. JLL said frontier markets accounted for 77% of North American data center capacity under construction in its midyear 2026 analysis, reflecting the search for available land and power as traditional markets become more constrained.
The pace and geographic spread of that buildout mean more operators are entering contractual relationships with multiple tenants, increasing the importance of understanding exactly what those agreements require if something goes wrong.
Murchek said the difficulty arises when an SLA transfers a financial responsibility to the data center owner that the owner’s property policy was not designed to absorb.
“In the SLA, it might say the building owner is going to take care of this particular claim or outage. But then you go back to the policy, and the policy says, ‘No, we only take care of what is owned by the building owner. We’re not taking care of the tenant’s property,’” he said. He compared the distinction with an apartment building, where the landlord insures the structure while the tenant is responsible for personal property.
A data center arrangement can become considerably more complicated because the commercial contract may make the operator responsible for losses involving property or operations that sit outside those traditional boundaries.
The potential exposure is also not limited to physical damage. Murchek pointed to a past data center claim in which an SLA required four operations employees to remain on site to monitor areas including temperature, water flow and physical security.
One employee had to leave because of a family emergency, leaving three people in the building. The data center itself continued to operate normally, but the staffing requirement in the contract was no longer being met.
“The tenant then asked for the building owner to give them some kind of a concession, because their service level agreement was no longer met,” Murchek said. As he recalled it, the SLA carried a penalty of approximately $10,000.
Business interruption can create another layer of uncertainty. Murchek described a data center damaged by straight-line winds that had to be shut for several days while temporary protection was constructed over the building. Most tenants were able to transfer their operations elsewhere, but some had no alternative location. Whether the resulting interruption became the responsibility of the tenant or data center operator depended partly on the terms of the SLA.
The challenge for brokers and risk managers is therefore not simply assessing the property, equipment and business interruption limits attached to a rapidly growing facility. Contractual documents being signed by operational teams also need to form part of the insurance discussion.
Murchek sees closer coordination on these agreements as data center risks become more complex. “I think the operations team and the risk management team are talking much more and more recently than they have in the past to fill those gaps,” he said.
