Alot of commercial property owners use renter insurance to protect their property from damage or neglect. A lot of renter’s insurance policies excludes all coverage during vacancies. Unfortunately, the policies often fail to specifically define vacancies with any length of time or what exactly constitutes a vacant property. The confusion often leads to litigation when there is a difference of opinion between owners and insurance companies over whether a property was truly vacant.
Insurance policies typically include a provision titled vacancy and occupation. Found in both commercial and residential home insurance policies, has been a source of frustration from the insured for a long time. Vacancy generally refers to a building or place being completely empty without any possessions or property located on the premises. Unoccupied means that the occupant is temporarily away, and that possessions remain on site. Insurance policies most frequently deal only with vacancies.
When disputes over vacancies arise, and the insurance policy only uses general terms for vacancy, litigation can occur. In litigation, adjusters refer to the common dictionary definition of vacancy and occupation when processing claims. Even with policies where vacancy is explicitly defined, it can be uncertain when the vacancy occurred in cases when a tenant abandons a property, etc. This makes it hard to determine with certainty if the loss being claimed happened when the property was still occupied, or if it happened after the property was vacant. It’s difficult to know when exactly a property was abandoned, for example.
Times of economic uncertainty led many insurance companies to focus more on vacancy provisions. In 2008 during the financial crisis, a lot of people lost their homes. Vacant properties were frequently subjected to higher rates of vandalism, water damage, and other loss. Vacant properties also often didn’t have anyone tending to them, so damage would go unseen and spread throughout the property. Vacant properties typically experience higher levels of loss, so insurance companies don’t want to be held liable in the event a property is vacant. Generally, vacancy provisions designate a property as vacant if less than 31 percent of its total square footage is rented. For residential homes, a home or unit is deemed vacant if there is no lease in place. New building construction and even renovations are exempted from almost all vacancy provisions.
Over the years there have been many changes to vacancy provisions in homeowner and commercial property insurance. Insurance policies change and adapt to current property and broader economic trends. Remember, it’s in each insurance company’s interest to strike a balance between offering value to its customers without exposing it to large potential losses. Finding a law firm that can help break down vacancy provisions and their impact on your home or commercial property is always recommended. They will be able to walk owners through policies and understand how to best protect themselves in the event of losses. Woodall Batchelor PLLC has helped clients in Texas for years navigate vacancy provisions successfully so their assets are properly protected.
If you’re interested in finding out more information about renter’s insurance or property insurance policies, terms, or anything regarding legal consequences for commercial real estate, call our team at today.