Can a leak caused by tenant negligence lead to a claim against the freeholder?

Hi, I own the leasehold for an upstairs flat, which I rent out to tenants. The issue I have is when the tenants cause damage downstairs due to an act of negligence, such as kids spilling water out of the bath or having a shower without the shower curtain closed. This leads to damage in the downstairs flat, which belongs to another leaseholder.

From what I understand, the claim from the downstairs leaseholder should technically be directed at the tenants, as the damage is due to their negligence. Is that correct?

The problem comes from a clause in the lease which states that the leaseholder must indemnify the freeholder against acts of omission (which I understand to mean negligence) from both the leaseholder and any underlets (tenants) or contractors. The lease also mentions that if the insurance doesn’t cover acts of omission, the leaseholder must still indemnify and reimburse the freeholder.

So, if the downstairs leaseholder makes a claim against the freeholder, it seems I could be liable, and there may be no insurance coverage for this. Is that correct? If so, is there a way to avoid this situation?

If this is accurate, what type of insurance would cover me? I’ve looked into landlord insurance, and even those that include accidental damage, but they only cover the landlord’s property, not someone else’s. It seems I would need some sort of liability insurance, but do any policies cover situations like this? These types of things must happen all the time, so there should be coverage for it, right?

Thanks,

Jason