Vacancy . . . Is your Building Really Covered?

By | December 28, 2010

Article by:

Justin Robinson, CIC

Account Executive

The Buckner Company

Are you covered if your vacant building burns down?

Commercial property insurance policies include a condition that limits or excludes coverage when a building is vacant beyond a certain period of time.

Definition of Vacancy

If you are the building owner then your building is considered vacant when at least 31% of its total square footage is:

1. Not rented to a lessee or sub-lessee and used by the lessee or sub-lessee to conduct its customary operation; and/or

2. Used by you (building owner) to conduct customary operations.

If the insurance policy is issued to you as the tenant, and with respect to your interest in the Covered Property, building means the unit or suite rented or leased to you the tenant.  The building is considered vacant when it does not contain enough business personal property to conduct customary operations.

Vacancy Provisions

If the building where loss or damage occurs has been vacant for more than 60 consecutive days before the loss or damage occurs: The policy will not generally pay for any loss or damage caused by any of the following even if they are Covered Causes of Loss:

  1. Vandalism
  2. Sprinkler leakage, unless you have protected the system against freezing’
  3. Building glass breakage
  4. Water Damage
  5. Theft or
  6. Attempted theft

With Respect to the Covered Causes of Loss other than those listed above (1-6), the policy reduce the amount we word otherwise pay for the loss or damage by 15%


  1. A building owner signs rental agreements with various tenants that will ultimately occupy 40% of the building.  At the time of the loss only 10% of the building is actually occupied.   The building owner thinks that the building isn’t vacant because the lease agreements are in place. However; the insurance company disagrees because the tenant’s are not using the rented space to conduct customary operations.
  2. ABC owns a building and occupies 35% of it to run its operations.  The remaining 65% of the building is leased out the XYZ. XYZ decides to move out of the building, but left some equipment behind with intentions to pick it up at a later date.  65 days later a vandal breaks, steals the left behind equipment of XYZ and then lights the building on fire. Because ABC occupies more than 31% of its own building it is not considered vacant per the policy definitions.  Therefore ABC’s insurance policy will afford coverage for its damaged building. However, XYZ’s policy considers the building vacant because it no longer occupies its portion of the building. Therefore XYZ has no coverage for its stolen equipment because under vacancy provisions theft is an excluded coverage.

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