April 8, 2010

Our insured, a manufacturing company, moved from one building location but continued to work in the shop and do some construction work at the old location until the end of December, 2009.

The employees were in and out of the old location throughout most of December. They used the forklifts that were stored inside the building to load structural steel that had been built for the jobsite throughout that time frame. They did not use the offices and did only minor shop work, mostly loading and unloading. There were also crews in the building in December continuing to move items out of the building and do minor facility maintenance and cleaning. The building was vacant during January, 2010. A theft of copper was discovered on February 1, 2010.

The adjuster issued a reservation of rights due to the policy’s vacancy clause, referring to the portion of the clause that states, “Such building is vacant when it does not contain enough business personal property to conduct customary operations.” Our client worked in the building through December. Would you agree that the forklifts and structural steel in the building in December would qualify as enough personal property to conduct customary operations?

Texas Subscriber

If the insured owns the building, the standard on the ISO CP 00 10 is that at least 31 percent of the building must be used to conduct customary operations. If the insured is a tenant, then the building must contain enough business personal property to conduct customary operations. We cannot determine what the insured’s customary operations are; that is a question of fact and not of coverage. While the company was conducting business, was it what they ordinarily conducted there, or were they essentially just moving prebuilt materials to a jobsite? If the company normally did more than that at that location, it does not sound like customary operations were being performed.

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