Beware of insurance coverage on vacant buildings

When an owner moves their business out of a building or loses a major tenant, the building can remain vacant for an extended period. In addition to enduring the pain of lost income and having to pay property taxes and other expenses to support a building that is not producing income, the homeowner must also think about a possible pitfall in his coverage of the property. ‘assurance.

When an insurance company issues a typical property insurance policy, the company examines the insured building and assesses the risks of that building. If the building is actively occupied and someone is doing business there, the risk of vandalism and “malicious intent” against that building is relatively low. But if nothing happens in the building, it is an invitation to vandalism and “malicious mischief”.

In response, property insurance policies typically state that if a building is vacant or unoccupied for a certain period – typically 30 or 60 days – then the policy will not cover certain losses, such as damage to the building from vandalism. and “malicious mischief.” “

This so-called exclusion of vacancies has given rise to numerous disputes. For example, there is sometimes a difference between “vacant” and “unoccupied”. The policy could exclude only one of these circumstances. In this case, the courts might need to understand what the two words mean and how they differ. If very limited activities take place in the building, it may be “vacant” but not “unoccupied”, or vice versa.

And what does “malicious mischief” mean? If someone deliberately starts a fire next door and burns this building down, could this “malicious mischief” not be covered if that building is vacant or unoccupied? Or, alternatively, is it a “fire”, which the police could still cover even for a vacant or unoccupied building?

These are fascinating questions, which one can try to answer by reading probably hundreds of court decisions.

A prudent owner will, of course, have no interest in such a business, or pay lawyers to do so. Instead, a prudent homeowner will know that as soon as a property becomes vacant or unoccupied, or both, the landlord should carefully review the building’s property insurance policy. Does he have a vacancy exclusion? And what exactly does this job exclusion say?

If the building remains vacant or unoccupied, the owner must consider whether it makes sense to notify the insurer. This notice will likely result in a revaluation of the insurance coverage. It may even result in a change of coverage or cancellation.

It is best if the owner is made aware of this problem before they have to file a complaint rather than after. If the owner does nothing and then makes a loss claim to which the vacancy exclusion applies, the owner runs the risk that the carrier will deny coverage. In this case, the owner will only have paid the insurance premiums for the right to sue the insurance company and will likely be the loser.

Conclusion: as soon as a building becomes vacant, beware of the insurance policy which disappears, at least because the exclusion of the vacancy concerns vandalism, “malicious mischief” and sometimes other dangers.

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Justin D. O'Neill