Vacancy Clause Discussed

October 8, 2012

Our insured has a policy insuring ten structures/buildings. Building 1 is insured for $9 million and is occupied as warehouse, cold storage and an office, and contains fences and miscellaneous structures and equipment. The insured carries a CP 00 10 10 90.

The cold storage, previously occupied by a third party, has been vacant for a few years and recently suffered its third vandalism and theft loss of the air conditioning compressors, which used to service the cold storage.

Because Building 1 houses various separate occupations, we are unsure if the vacancy clause applies to property that serviced the now-vacant cold storage.

Puerto Rico Subscriber

Newer editions of the CP 00 10 form state that, for policies issued to the owner or general lessee of a building, that building means the entire building, and that the building is vacant unless at least 31 percent of its total square footage is rented and used to conduct customary operations or used by the building owner to conduct customary operations. The 10 90 edition does not include this breakdown but just states that a building is vacant when it does not contain enough business personal property to conduct customary operations. If all of these occupancies are in the same building and only the cold storage portion is vacant, technically, it seems that the building contains enough business personal property to conduct customary operations, even if the cold storage operation is no longer one of the customary operations. It is kind of a sticky way out of the vacancy clause, but it is our opinion that an argument can be made for it not being applied in this situation.