TRB Properties' Bakersfield location was changing! More than $1,000,000 of renovations and improvements were being installed in order to attract new business tenants. Unfortunately, the plans changed when a pipe burst and caused significant water damage. TRB wasn’t concerned, because the building was insured with Fireman’s Fund. TRB submitted the claim and waited for the check to arrive. Was it ever surprised when it received a letter denying the claim instead of a check! Fireman's Fund denied the claim because it considered the building vacant, and there is no coverage for water damage when a building is vacant.

Since everyone agreed that water damage is excluded if the building is vacant, the court case focused on whether or not the building was actually vacant.

Fireman's Fund argued that the building was vacant because it did not contain sufficient personal property to conduct normal operations. TRB agreed but pointed out the exception in the vacancy clause that applied to buildings under construction. The focus then shifted from vacancy to buildings under construction. Fireman’s Fund now argued that this exception applied only to new construction but TRB took the position that the policy had no such limitation.

The court searched through the entire policy, seeking a potential resolution, and discovered that vacancy was also addressed in the cancellation clause. That clause permitted cancellation if the building was vacant, but buildings under construction or being renovated were not considered vacant. As a result, the court used Fireman Fund’s own policy language to determine that the building was not considered vacant while being renovated, and the claim was paid.

In this court case, the vacancy provision referred to was in the 06 95 edition of the Insurance Services Office (ISO) Building and Personal Property Coverage Form. The 10 00 edition of this form was changed to specifically provide that buildings being renovated are not considered vacant. The form was further revised in the 04 02 edition and another update is scheduled for 2008 or 2009. Are you aware of the changes made in each updated edition?

Do they know that their coverage is reduced shortly after a building becomes vacant? Do they understand how insurance policies define vacancy? A building they consider simply underutilized may be considered vacant by the definition in the insurance policy. Posting an easy-to-understand e-marketing article on your Web site or including a similar article in a mailing to your customers both informs and alerts them of these and other potential problems.

Fire, windstorm and other losses that occur in a neighborhood often bring a heightened awareness of insurance coverage needs to everyone nearby. Maybe you could answer questions regarding vacancy or other issues that have arisen. This might be the perfect time to contact a prospect. You could use the attached letter as a starting point for your cover memo.

The Insurance Marketplace is the most widely used directory for locating an excess and surplus lines provider because it is accurate and stays up with the fast changing excess and surplus market. The following classifications have been added to help you stay on top of the market!!

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