In the wake of most state governors issuing executive orders that require business closures to reduce the spread of COVID-19, many commercial real estate spaces have become unoccupied and may eventually be vacant. These properties are more susceptible to damage from a variety of foreseeable events such as vandalism and malicious mischief, theft and attempted theft, water damage from sprinkler systems, freezing pipes, continuous water leakage over time from various pipes and appliance, infestation of animals and glass breakage.
Standard property policies have several provisions within the contract that exclude or restrict coverage for many of the types of losses listed above. Some coverage exclusions or restrictions specifically apply if the building is vacant for a period of longer than 30 or 60 days. If you are a tenant in a building, it is considered vacant when the leased space does not contain enough business personal property to conduct customary operations. When the policy is providing property coverage for a building, it is considered vacant if less than 31% of the building is occupied or used by the building owner to conduct customary operations. Some carriers, on request and for an additional premium, may provide coverage for some otherwise excluded perils if the situation is expected to be temporary. Read your policy to determine the exact provisions contained within.
Companies often give policyholders premium credits for operational sprinkler systems and various fire, burglar and water leak detection systems. Often, if these systems are deactivated for any reason, losses that could have been prevented or minimized are not covered.
Some property carriers have announced that during this time they may pay claims that would have otherwise been excluded because the property is vacant, providing the vacancy took place after a specified date. This is short-term relief for what could be a long-term problem.
What Can You Do?
If your building is unoccupied or vacant, first and foremost call your North Risk Partners representative. We can tell you the various ways your carrier is assisting policyholders through this crisis. We may be able to offer appropriate suggestions for coverage adjustments with your current insurance carrier. As an independent agent, we may be able to offer other coverage options.
Implement property risk management techniques, specifically with regard to your unique situation. There are several loss control services available. For your reference, Travelers Insurance Company has published Loss Prevention Tips for Vacant Buildings.
If you have questions related to this update, please contact your North Risk Partners advisor. Don’t have an advisor? No problem. We’ll help you find one.
This regulatory update is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.