When an insured is relocating or has lost a tenant, there may be a period of time during which a building is not being used for normal business purposes. The question our insureds often struggle with is whether there is any impact to coverage, and if so, at what point the change in coverage takes place.  To follow is a brief summary of effects on property coverage, what constitutes a vacant building, and what can be done to help the insured through this situation.

Impacts to property coverage – If a building has been vacant for more than 60 consecutive days prior to loss or damage, there will be no coverage for vandalism, sprinkler leakage (unless the sprinkler system has been protected against freezing), building glass breakage, water damage, theft, or attempted theft. In addition, the amount normally paid for the loss will be reduced by 15%.

When is the building vacant? – A building is vacant unless at least 31% of its total area is being used for normal business by the insured, or the insured’s tenant. This does not apply to buildings under construction or renovation.

What can be done to reduce or eliminate these policy restrictions? – Under our Commercial Package Policy (CPP), the Vacancy Permit form CP 04 50 is available, subject to underwriting approval. For a premium charge, this form cancels the vacancy loss conditions indicated above, at the location and during the time period indicated in the form. Underwriting may be willing to cancel some vacancy conditions, while retaining exclusion for vandalism and/or sprinkler leakage. Those exceptions can be made under this same form.

What information will underwriting need to consider a Vacancy Permit?  – Questions may vary, depending on the situation, but be prepared with the following information when contacting your underwriter:

1.       How long has the building been empty?

2.       What are the opportunities to rent, occupy, or sell the building, and what action is being taken toward that end?

3.       Who is routinely checking the building, and with what frequency?

4.       Have the water, heat, and/or electricity been turned off?

5.       Is there a fire and/or burglar alarm system, and does it remain operational?

Though increased exposures associated with vacant buildings are a concern, your underwriting team is willing to work with you and your Frankenmuth insureds to mitigate the impact to coverage for brief periods of vacancy, while the insured seeks a tenant or buyer for a building.