Property Insurance: Vacancy / Occupancy Provisions

With many people presently facing economic hardships, a greater number of structures sit unoccupied or vacant while awaiting sale or lease.

When damage to these properties occurs and the insurance claim is denied, many property owners find out too late about the vacancy and occupancy provision of their commercial property or homeowners policy. It is no surprise, then, that this provision has been the source of frequent contention.



In understanding this provision of your policy, the definitions of a few terms are important. The term “vacant” is understood to mean empty, having nothing in it, devoid of contents. The term “unoccupied” is understood to mean without occupants, but with furniture and personal effects being present. This generally implies a temporary absence of the occupants, and for this reason, insurers are primarily concerned with structures that are vacant. Often, these terms are defined within the language of the policy. Where this is not the case, their meaning is determined by dictionary definition and by case law.

The structure that is vacant, or “building,” is defined slightly differently based on who the policy is issued to. In the case of a tenant, it is considered to be only the unit or suite rented or leased to them. In the case of an owner or general lessee, it is considered to be the entire structure.



In current standard homeowners and commercial policies, if a building is vacant for more than 60 consecutive days before any loss or damage occurs, the vacancy/ occupancy provision comes into effect. The insurer will not be obligated to pay for any damages resulting from theft, vandalism, glass breakage, and most kinds of water damage. A notable exception exists in cases of sprinkler system or other plumbing leakage from freezing, when heat has been maintained in the building or the water has been shut off.

Additionally, for all other losses covered by insurance during this period, the insurer will typically reduce the loss by 15 percent.



The provision does not apply to buildings under construction or those undergoing repair, remodeling, or renovations that preclude their normal occupancy. However, the actual applicability of construction or renovation work to a given loss claim is still frequently challenged. For this reason, it is important for those insured to thoroughly document any work done, in order to provide supporting verification for their claim at a later date.


Vacancy Permit Endorsement

For those with seasonally operating businesses, property that is for sale or lease and vacant, or those traveling for extended periods of time, purchasing a vacancy permit endorsement for their policy is often the best choice to address their liability under the vacancy/ occupancy provision.

This endorsement suspends the exclusions normally in effect after 60 consecutive days, such as theft, vandalism, and water damage. It also suspends the 15 percent reduction in coverage of other insured losses. If your insurer is willing to issue this type of endorsement, it typically requires paying an additional premium.

Claims involving vacancy/ occupancy issues are often challenging for those insured. They typically require a thorough and extensive investigation of the circumstances surrounding the loss. As such, a thorough understanding beforehand of your policy language and its coverage limitations, combined with the essential services provided by an experienced public insurance adjuster, will see you through to the recovery you deserve.

Have questions about your property insurance claim? Feel free to contact Stark Loss for more information about how a Public Adjuster can help.

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