The National Fire Protection Association (NFPA) estimates that U.S. fire departments respond to an average of 30,200 structure fires per year in vacant properties. The most recent data (2016) estimates direct property damage to these properties at $710 million annually.
Many insureds don’t realize that there are restrictions in their Commercial Property insurance when a building becomes unoccupied or vacant. A building is considered vacant if it is 30% unoccupied, and if it’s vacant for more than 60 consecutive days before a loss occurs, there is no coverage for vandalism, sprinkler leakage, building glass breakage, water damage, theft, or attempted theft – common hazards that trigger losses for vacant buildings.
Inside Vacant Building Claims
Vacant properties attract trespassers, arsonists, thieves and other criminals. Copper thieves target vacant buildings, especially those that are not secured and without power. In addition, anyone who is inside or around a vacant property and is injured can sue the property owner for premises liability negligence.
Following are several examples of losses to vacant buildings.
- A break-in occurred at a vacant commercial property in which thieves stole copper plumbing from a building with an active water supply. The water ran throughout the building for three days before anyone was made aware of the incident. Damage to the building was estimated at $2.5 million.
- A thief entered a vacant building and, during a 24-hour period, ripped every piece of copper wiring and piping out of the wall. The actual loss of the copper was valued at $150,000, with property damage to the building estimated at $750,000.
- Vagrants broke into a vacant home during an ice storm, and started a fire to warm up. The fire soon became uncontrolled and resulted in a $350,000 loss.
- A passerby slipped and fell on an icy sidewalk in front of the owner’s vacant property. He broke his arm and leg, which cost $150,000 for surgery and other medical expenses. He sued the owner to recover his costs and for pain and suffering.
- Wind tore off sections of a property owner’s vacant building, causing $80,000 in property damage.
Make sure your insureds are aware of these types of claims and the vacancy provision in a Commercial Property policy so that you can provide them with the right coverage should a loss occur. Vacant Building Property insurance will provide coverage for direct physical loss, including losses resulting from fire, theft, vandalism and water damage, among other perils. Vacant General Liability insurance will step in to protect against third-party bodily injury and property damage liability risks.
Limit Vacant Property Risks
Property owners should also take precautions to prevent and mitigate the hazards unique to vacant properties. This includes but is not limited to:
- Notifying local authorities that the building is unoccupied; providing each entity (police, fire department) with contact information in case of an emergency.
- Advising utility companies of the vacancy; requesting to be contacted in the event of high usage or emergency.
- Notifying the alarm company of the vacancy, creating new alarm codes and updating contact information.
- Contacting other building owners in the area and asking to be notified in the event of an emergency.
- Suspending mail and delivery services to the building.
- Conducting regular walk-throughs of the vacant property, and hiring a security guard.
- Securing the premises by installing additional locks, making sure security systems are in place and operational, and ensuring proper lighting.
- Maintaining all sprinkler and fire protection systems, boiler and machinery, and heat or smoke detection systems.
- Planning for weather events.
Distinguished’s Vacant Building Program includes a Property and General Liability component with a focus on single, multi-family, and commercial structures, including retail and office buildings.
Sources: National Underwriter