The standard Insurance Services Office (ISO) building and personal property coverage form, along with most proprietary commercial property forms, contain a vacancy clause in the conditions section. This clause provides definitions for building and vacant in different scenarios:
- For tenants, building refers to the specific unit or suite they rent or lease. Vacant means that the rented or leased space does not have enough business personal property to carry out regular operations.
- For owners or general lessees, building encompasses the entire structure. A building is considered vacant unless at least 31% of its total square footage meets one of the following conditions:
- It is rented to a lessee or sublessee who uses it for their customary operations.
- It is used by the building owner for their customary operations.
These definitions and provisions are crucial for property owners and tenants to understand to ensure appropriate coverage and protection for their properties.
Buildings under construction or renovation are not considered to be vacant under the ISO form. The ISO form does not consider buildings under construction or renovation as vacant. However, under the “Vacancy Provisions” of ISO property forms, coverage is excluded for loss or damage in a building that has been vacant for 60 consecutive days prior to the occurrence of the loss or damage. This exclusion applies to various causes of loss, including:
- Vandalism
- Sprinkler linkage, unless you have protected the system against freezing
- Building glass breakage
- Water damage
- Theft
- Attempted theft
In cases where the covered causes of loss are not excluded by the vacancy provisions, ISO forms specify that the insurance carrier will reduce the amount paid for the loss or damage by 15%. It is important to be aware of these provisions to ensure proper coverage and understand the potential impact on claims.
Failure to comprehend these clauses can lead to potential gaps in insurance coverage, leaving properties vulnerable to loss or damage. By familiarizing themselves with vacancy provisions and the conditions that determine vacancy status, individuals can make informed decisions and take necessary steps to mitigate risks and safeguard their assets.
To learn more about how vacancy clauses and how they can impact your company, contact a Marsh McLennan Agency (MMA) advisor today.
