Hi Folks:
The existence of vacant commercial property may potentially create changes in a real estate owner’s
insurance coverage. Most policyholders are not aware of the restrictions in their property insurance
when a building is vacant. The ISO (Insurance Services Office) property form, found in most commercial
property policies, addresses vacancy by including provisions such as:
1. If a building is vacant for more than 60 consecutive days before the loss occurs, there is no coverage
for loss caused by the following perils:
• Vandalism
• Building glass breakage
• Water damage
• Theft or attempted theft
• Sprinkler leakage (unless the insured has protected the building against freezing)
2. Also, with respect to any other covered cause of loss, e.g. fire or wind, the amount that would
otherwise have been paid for loss or damage is reduced by 15 percent.

This provision is of particular concern to owners of properties containing multiple tenants, one of
which makes up a majority of the building—for example, a 12-unit strip mall in which a grocery store
leases five of the 12 units. In this situation, the loss of that largest tenant could trigger the vacancy
provision, which can potentially drastically limit or, in certain instances, exclude coverage, change
deductibles or cause the underwriter to non-renew or to cancel your policy.

Solutions
Being aware of the vacancy provision in the property policy can help reduce the potential likelihood of
litigation and losses. This is why it may be essential to take the following steps:
• Notify your insurance company about the vacancy so proper coverage can be continued under the
policy.
• Review the policy terms and conditions applicable to vacant property. Vacant commercial buildings
may cost more to insure than occupied commercial buildings because they often have more
exposure to losses. Thus, continued, full coverage may often require additional premium.
• Check with your carrier to determine if the vacancy provision applies. Zurich, for example, does not
have a vacancy clause. Zurich understands that there’s been a fundamental shift in the exposures of
vacant properties and is prepared to underwrite them without any reduction in coverage.
• Consider a property insurance endorsement that suspends some or all of the coverage restrictions
that apply to buildings that have been vacant for more than 60 days. Some carriers offer an
endorsement, vacancy permit, which reinstates coverage for the types of losses mentioned above.
This endorsement may require additional premium.
Bob