Vacant Building Insurance Issues

Insurance companies do not like vacant buildings.

First, what is a vacant building? Here is a common definition used in the ISO property insurance policy:

When this policy is issued to a tenant, and with respect to that tenant’s interest in Covered Property, building means the unit or suite rented or leased to the tenant. Such building is vacant when it does not contain enough business personal property to conduct customary operations.

When this policy is issued to the owner or general lessee of a building, building means the entire building. Such building is vacant unless at least 31% of its total square footage
is: (i) Rented to a lessee or sub-lessee and used by the lessee or sublessee to conduct its customary operations; and/or (ii) Used by the building owner to conduct customary operations.

Buildings under construction or renovation are not considered vacant.

Now, how are vacant buildings covered? Not well.

First, after the building has been vacant for 60 consecutive days there is no coverage for vandalism, sprinkler leakage (unless you have protected the system from freezing), building glass breakage, theft or attempted theft.

Second, any loss that is paid will be reduced by 15%.

Special coverage is available. Talk with your insurance advisor about how your coverage works and what your options are.

Scott Simmonds, CPCU, ARM, CMC
The Insurance Assurance Consultant