For owners of commercial property, it is a good time to review vacancy exclusions in insurance policies. Many policies include limitations that may limit or completely eliminate coverage in the event of a loss due to damage if the property has been vacant for a specified period of time (typically 60 days, but policy wording is not standard and should be checked for exact wording). Although vacancy exclusions should always be noted, the current conditions necessitate prioritizing a managerial review of policies.
After a ten-year period where commercial real estate vacancy rates for office space had been consistently steady, the government Stay-at-Home orders have resulted in changes for many businesses, some of which are anticipated to alter working arrangements long-term. Some insuring carriers may make favorable vacancy accommodations for first-party commercial property policies in the event that policyholders are affected by government orders and directives to prevent the spread of COVID-19, while other carriers do not alter existing policy wording. CNA Insurance Company recently announced it will not consider a building to be vacant (as the term is defined in their policies) “for the days during any period of occupancy where such occupancy changed solely as a result of a government stay at home order or similar directive relative to COVID-19.”
An article published by Robert J Prahl, CPCU, offers more information on this subject matter and other considerations for the Insured.
Vacancy Occupancy Clauses Protective Safeguards Endorsements