Report from the Front: Agent Questions About Vacant Property

Retail property and casualty agents are adapting to the new realities of “For Rent” signs on shop windows and foreclosure notices on home lawns. Agents who never or seldom handled vacant property are now learning the ropes and are looking for answers to some basic, as well as not so basic, questions.

“Along with providing a steady stream of vacant-property submissions, agents tend to ask us four basic questions about vacant-property placement,” said Rich Gobler, assistant manager for the San Francisco Branch of Burns & Wilcox. “They want to know how we handle partial occupancy, whether we can help them get building ordinance protection, if we handle vacant property on a monoline or package basis, and if we can quote the same day,” he said. “The answer to all four is ‘yes.’”

Recent statistics support the view that, at least in California, home vacancies are on the rise. The U.S. Census Bureau reported that the home vacancy rate in California reached 2.8 percent, a full percentage point higher than last year. While standard carriers might insure a building only if occupancy is below a certain percentage, an excess and surplus (E&S) brokerage like Burns & Wilcox has markets that can handle any vacancy-occupancy ratio, Gobler said. Many carriers won’t offer building ordinance–an add-on that covers the extra costs to repair or rebuild in compliance with current building regulations after a loss–but it is routine for Burns & Wilcox to provide a quote on the coverage. And Gobler said they can handle package or monoline coverage.

As for how fast a quote can be delivered, Gobler explained that he and his team generally can offer a quote the same day unless the submission is incomplete. When a quote is delayed on a vacant-property submission, it is because it lacks one of two necessary, but often neglected, pieces of information: the building-update history and the confirmation that the building is secured from entry.

For a building that is at least 25 to 35 years old, depending on the carrier, the agent must submit an update of repairs and renovations. That should specify what year changes were made to the building’s wiring, roofing, heating and HVAC (heating, ventilation and air conditioning) systems, Gobler said. The agent must also confirm that the building has been secured from entry with locking doors and windows. If a door or window has been broken, the opening must be covered over with wood.

Agent questions about vacant property can vary from region to region. In Michigan, where troubles in the auto industry hit the real estate sector early and hard, Commercial Underwriting Manager Chandra Kwaske of the Burns & Wilcox branch office usually gets two different questions from agents. They want to know at what point a vacant building is not considered a vacant building and whether theft of copper pipes is covered under vandalism, she said. “Agents will tell us about a vacant building, then ask whether it can be classified as a warehouse because the owner stores some personal property there and comes in each day to check it out,” she said. “But it is a vacant building because to be classified as a warehouse, it has to actually operate as a business.”

Some carriers are pulling electrical meter readings and water meter readings to see if something is going on inside the building. “If the meters aren’t moving, it is not in business,” Kwaske said.

And agents are asking about copper pipes because the price of copper is rising, which results in an increase in the theft of copper pipes from vacant buildings, she said. Theft coverage is usually not offered for vacant buildings, so some agents look for coverage under a property’s vandalism provisions, she said. The answer is simple: Theft of copper piping is not covered because vandalism is destruction and theft is the removal of something, Kwaske said.