Vacancy Definition under Commercial Property Policy

January 13, 2011

We are dealing with an insurance company that is applying a large penalty to our client, claiming their covered building was vacant. The policy does not define “vacancy.” Could you please define “vacancy” for a commercial property policy?

We are appealing this penalty as the insurance company paid out the limit of liability in contents, which seems obvious to us that the building was not vacant but just did not have people inside of it at the time the fire occurred.

New Jersey Subscriber

The insurer has already set the precedent by paying for contents (unless the policy has a stipulation allowing coverage for contents even when the building is vacant). ISO forms generally define vacancy as 31 percent of the total square footage of the building being rented or used by the owner for customary operations. Since your policy does not provide such a definition, the term is up for interpretation. Couch on Insurance states broadly that a premises is vacant when it does not contain goods or personal property. In your situation, minus a definition of “vacancy” and with other sources providing such a broad definition, the benefit of the doubt should go to the insured.