A building that looks occupied to the average person may be considered vacant to an insurance carrier—and such vacancies can trigger a clause in standard policies that limits coverage for unwary building owners and lessees.

Giving some insurance basics for vacant buildings during a recent PC360.com webinar, Christopher Zoidis, vice president of the Special Risk Division of wholesaler/MGA Burns & Wilcox, notes that insurers specifically define vacant property in standard ISO (Insurance Service Office) forms with clauses referring to “less than 31 percent of the square footage” being occupied.

For tenants, a building that does not contain “enough business personal property to conduct customary operations” is also “vacant” according to the wording of vacancy clauses in standard policies, Zoidis adds.

If a building is vacant under this definition for a period of more than 60 days, then standard ISO forms eliminate coverage for some key specific perils, he says. According to a recent whitepaper published by Zurich North America, the perils excluded by the vacancy clause are vandalism, building glass breakage, water damage, theft or attempted theft, and sprinkler leakage. And a penalty kicks in reducing losses paid for covered perils—like fire and wind—by 15 percent, says Zoidis.

Zoidis notes that vacancy permits, which reinstate coverage for the excluded perils, have become widely available—from both standard and excess-and-surplus lines carriers—over the last few years. Some residential property owners can even get replacement-cost coverage, he says, noting that the actual-cash-value basis of coverage had been the prevailing standard for vacant property prior to 2010.