The insured knew the building would required renovations prior to moving in, such as painting the offices, installing new overhead ceiling tiles, installing new floor coverings, and cutting in and installing new windows.
The carrier denied the insured's claim due solely to the vacancy provision of the CP 00 10 04 02 Building and Personal Property Coverage Form. In his declination letter, the adjuster quotes the Vacancy provision of the policy and includes the following:
6.Vacancy
a. Description of Terms
(2) Buildings under construction or renovation are not considered vacant.

I asked the adjuster to have their counsel review the claim again and render a revised opinion. We are of the opinion that the intent of this condition was not to penalize an insured who is not able to move his business into the building immediately following closing. Even though renovation had not begun, the insured's intent was to renovate the space before moving into the building.

Could you review the policy form and specifically the text that reads; ” If the building where loss or damage occurs has been vacant for more than 60 consecutive days before that loss or damage occurs…”?  The building was vacant when purchased by the insured and had been for about five month. The carrier takes this portion of the policy to include the time before the insured purchase. The carrier's position regarding renovation is that since the insured had not begun renovations, that provision does not apply. 

What are your thoughts?

Texas Subscriber

Even without the provision stating that “renovations are not considered vacant,” it is our opinion that the vacancy provision does not apply to your loss. The building was not vacant for more than sixty days under this policy or under the insured's ownership. But, because the insured is in fact renovating the building, that exception to the provision would apply even if the building had been vacant more than sixty days under the insured's ownership and this policy. Thus, the carrier is not correct in denying the claim based on the vacancy provision.

According to Couch on Insurance, “If an insurance company has knowledge through its agent, when a contract of insurance is effected, that the premises are vacant or unoccupied, then the issuance of the policy waives any provision as to vacancy or unoccupancy, at least as far as the existing vacancy is concerned.” Couch cites these cases: Providence Washington Ins. Co. v. Stanley, 403 F.2d 844 (5th Cir. 1968); Boston Ins. Co. v. Barnes, 171 S.E.2d 626 (1969); Travelers Fire Ins. Co. v. Bank of New Albany, 146 So.2d 351 (1962); Zweygardt v. Farmers Mut. Ins. Co. of Nebraska, 241 N.W.2d 323 (1976); Wells v. North Carolina Farm Bureau Mut. Ins. Co., 258 S.E.2d 831 (1979); Maryland Cas. Co. v. Craig, 194 S.E.2d 729 (1973).