A warehouse was damaged by fire and, after the owners filed a claim to recover from the loss, it was denied. That action resulted in the building owners suing its insurer. The latter argued that the warehouse was vacant, therefore their policy’s vacancy clause barred coverage.

Being persistent, the owners appealed the trial court decision, but the higher court agreed with the insurance company argument, even though the warehouse did contain some items when it burned. The courts held that the meager contents did not overcome the policy exclusion.

Click below for full additional details explaining the insurer position on how the building was used at the time of loss that justified rejecting the fire loss.

The warehouse owners tried to make the case that some scaffolding and a couple of other small, miscellaneous items that were inside their building meant that it was not vacant. But the policy exclusion made specific reference to a need for the building to be actively used as intended by the applicable business.

Certainly, the owners should have had more awareness regarding the exposure increase for a major property asset. The tenant was involved with warehousing a raw spice and had left the building several months before the loss. Not days or weeks, but nearly a half year!

Click here for a brief description of operations and coverage needs for a general warehouse operation. It is from the Commercial Lines Survey found in Advantage Plus.

It is quite easy to get tripped up with losses and that is bad enough when the situation is unforeseen. On the positive side, accidental situations often end up being ones that insurance will address. What is far worse are losses that occur when they can be seen coming.

It is a failure to ignore a situation that can increase the chances of a loss. Insurance policies are designed to assist with accidental, uncontrollable events. They embed an assumption that policyholders are vigilant about circumstances that may adversely impact the property they own. That is a chief justification for certain policy exclusions, such as changes in a building’s occupancy or use.

Click here for information on the vacancy provision that commonly appears in property coverage forms. It is from Emarketing for Agents found in Advantage Plus.

Insurance disputes that end up being litigated are quite common. Often the legal adversaries have legitimate arguments that could be caused by misunderstandings that take place from the point of coverage purchase. They are frequently due to ambiguities or errors in policy language that create confusion. But let’s also be up front about another, substantial, motivator – the financial consequences caused by a serious loss.

Obviously, arguments that one party attempts during a lawsuit are clearly driven by a strong need to secure coverage. Sure, interpretations of policy language can vary widely, but there are so many instances where one (sometimes both) party pushes an argument that strains belief.

In the end, the concept and viability of insurance is kept viable by all parties acting in accordance with policy intent. We’re all haunted (financially hurt) when anyone rationalizes playing fast and loose with handling losses. Accept the consequences.

Click here for an excerpt from an article revolving around poor, post-loss actions. It is from the August 2011 issue of Rough Notes Magazine found in Advantage Plus.