Experts Offer Best-Practice Tips For
Securing, Insuring Vacant Properties
BY SUSANNE SCLAFANE
DURING A WEBINAR titled “The New Edifice of Vacant Property: Protecting Asset Value as Commercial Real Estate Slowly Recovers” presented by PropertyCasualty360.com,
Zurich’s Jeff Shearman, senior risk-engineering consultant, reviewed a
host of security best practices for idle and vacant properties.
When preparing to idle a facility, “do
a vulnerability analysis” to identify areas
that natural elements can affect, such as
roof hatches and windows, as well as areas
that human elements can affect, he says,
referring to human actions ranging from
setting fires to squatting.
Shearman distinguishes between idle and
vacant properties, giving slightly different
definitions for risk-engineering purposes. Idle
properties are those with contents and sys-
tems left in place so that the facility can be
used for the same purpose in very short order.
Vocabulary Lesson: Defining Vacancy
A BUILDING THAT LOOKS occupied to the average person may be consid- ered vacant to an insurance carrier—
and such vacancies can trigger a clause in
standard policies that limits coverage for
unwary building owners and lessees.
Giving some insurance basics for vacant buildings during a recent Property-
Casualty360.com webinar, Christopher
Zoidis, vice president of the Special Risk
Division of wholesaler/MGA Burns & Wilcox, notes that insurers specifically define
vacant property in standard ISO (
Insurance Service Office) forms with clauses
referring to “less than 31 percent of the
square footage” being occupied.
For tenants, a building that does not
contain “enough business personal property to conduct customary operations” is
also “vacant” according to the wording
of vacancy clauses in standard policies,
If a building is vacant under this definition for a period of more than 60 days,
then standard ISO forms eliminate coverage for some key specific perils, he says.
According to a recent whitepaper published by Zurich North America, the perils
excluded by the vacancy clause are vandalism, building glass breakage, water damage, theft or attempted theft, and sprinkler
leakage. And a penalty kicks in reducing
losses paid for covered perils—like fire and
wind—by 15 percent, says Zoidis.
Zoidis notes that vacancy permits,
which reinstate coverage for the excluded
perils, have become widely available—
from both standard and excess-and-surplus lines carriers—over the last few years.
Some residential property owners can even
get replacement-cost coverage, he says,
noting that the actual-cash-value basis of
coverage had been the prevailing standard
for vacant property prior to 2010. NU
though not predictable tours” daily or weekly.
“Don’t go every Tuesday at 2 o’clock,”
Shearman says. And the tour shouldn’t be a
“WD-40,” he adds, coining his own phrase
for a drive-by at 40 miles per hour.
In a vacant facility, such tours can be
done more irregularly and less frequently,
For an idle facility, it’s very important that
protection (fire- and security-alarm systems)
remain in place. “In a vacant facility, insurers
still like to see such systems as much as possible. But if there’s just bare concrete and block
walls, then…it’s more palatable to idle or take
down [protection] systems,” Shearman says.
In either case—whether a building is
idle or vacant—resources such as copper
pipe and wiring may remain on site, making it a good idea to maintain a security-alarm system. Shearman advises owners
to check whether the security system is
“tied into the fire-alarm dialer.” In some
instances Shearman knows of, owners believed they were taking only the fire-alarm
system out, not realizing that the burglar
alarms were on the same modem, and they
unknowingly took those offline too.
Other guidelines Shearman provided
that apply to both idle and vacant buildings:
J Consider fencing the facility perimeter;
there are security systems available that
will activate if a fence is cut.
“They can make decorative fences that
don’t make it look like a prison but provide some added level of security,” he says,
helping owners to balance the goal of security with curb-appeal for potential buyers.
J Secure mail slots and drop points, such as
night deposits for banking facilities.
“Those are places people can pour flammable liquids into to set buildings on fire,”
J If you have a shed or portable building on
site, consider getting them off the property.
Shearman suggests that such buildings
can be turned into methadone labs or storage facilities for contraband. NU