Vacant commercial building insurance in Florida,
and the clause that empties the policy first.

Vacant commercial building insurance in Florida is ordinary commercial property insurance with the vacancy problem solved on purpose. The standard form, ISO CP 00 10, contains a vacancy loss condition: once a building has been vacant for more than 60 consecutive days, the policy pays nothing for vandalism, sprinkler leakage, building glass breakage, water damage, theft or attempted theft, and cuts payment on every other covered cause of loss by 15 percent. A building counts as vacant unless at least 31 percent of its square footage is being used for customary operations. The fixes are a vacancy permit endorsement (CP 04 50), a vacancy changes endorsement (CP 04 60) that lowers the 31 percent threshold, builders risk during a real reconstruction, or a purpose written vacant building policy. All of them have to be in place before the loss.

Almost every commercial building in Florida is insured on the ISO Building and Personal Property Coverage Form, CP 00 10, or on a carrier form built from it. Down in the loss conditions, past the coinsurance clause and the appraisal provision, sits the vacancy condition. It does two things, and both of them take effect on the sixty first consecutive day of vacancy before the loss.

First, it removes six causes of loss entirely. No payment for vandalism. No payment for sprinkler leakage, unless the sprinkler system has been protected against freezing. No payment for building glass breakage. No payment for water damage. No payment for theft, and none for attempted theft. Those are the six things that happen to empty buildings. The perils that survive, fire and windstorm chief among them, are the ones both an occupied and an empty building share.

Second, for every other covered cause of loss, the payment is reduced by 15 percent. That is not a deductible and it is not negotiable at claim time. A $400,000 wind loss on a vacant building settles at $340,000 before the named storm deductible is applied, and the owner covers the difference.

The condition is not an exclusion sitting in the exclusions section, which is part of why it surprises people. The declarations page still shows the building limit. Nothing on the front of the policy says the building stopped being covered for theft two months ago.

The form defines vacancy, and the definition changes depending on who the named insured is.

When the named insured is the building owner or general lessee, the building is vacant unless at least 31 percent of its total square footage is either rented to a lessee or sub lessee and used by that tenant to conduct its customary operations, or used by the building owner to conduct its customary operations. Two things in that sentence do real work. The measure is total square footage of the building, common areas included, not leased square footage and not the rent roll in dollars. And space that is leased but not being used does not count. A tenant who is paying rent on a dark unit while it looks for a subtenant is not conducting customary operations in it.

When the named insured is a tenant, the test looks only at the unit the tenant leases. That unit is vacant when it does not contain enough business personal property to conduct customary operations. A restaurant tenant who pulls the hood, the walk in and the line and leaves the shell behind has a vacant unit even though the landlord's building is fully occupied.

The practical consequence is that vacancy is a measured number, not a feeling about the center. Pull the site plan, add the square footage of every space actually in use, and divide. Do it the month a major lease ends, not the month after.

The most common version of this problem on the Gulf Coast is not an empty building. It is a live plaza with one dark box in it: a grocery that consolidated, a pharmacy chain that closed a location, a fitness tenant that did not renew. Rent keeps coming from the inline tenants. The center does not feel vacant.

Run the test anyway. A 40,000 square foot center with a 15,000 square foot dark anchor is 62 percent occupied and the vacancy condition does not apply. A 22,000 square foot center with the same 15,000 foot vacancy is 32 percent occupied and is one small tenant away from tripping it. The size of the center matters more than the size of the hole.

Three things to do the moment an anchor goes dark. Calculate the percentage in use and put the number in an email to your agent. Ask, in writing, whether the carrier wants a vacancy permit or a CP 04 60 for the interim. And walk the empty space for what underwriters care about: the water still on to a bathroom nobody checks, the roof hatch, the rear door hardware.

If the center is retail, the rest of the underwriting conversation lives on our Florida strip mall insurance guide, and the lease and certificate side lives on lessor's risk insurance in Florida.

Florida produces a specific version of this problem that inland states do not. A named storm damages a center in September. Tenants with damaged units cannot operate and leave. Repairs wait on an adjuster, then on an engineer, then on a roofer with a backlog. Occupancy drops below the threshold sometime in October. In late November, while the building is still open to weather and still full of contractors coming and going, the vacancy condition turns off coverage for theft, vandalism and water damage.

Work that is genuinely under way generally reads as construction or renovation, which the form says is not vacancy. But that only helps if the work is real and documented. Keep the permits, the signed contracts, the dated progress photographs and the contractor's schedule in the same folder as the claim file. An owner who can show an active job is in a very different position from an owner who can show an intention.

The ordinary Florida risks do not care whether a building is occupied. All of Florida is a flood zone, hazardous or not, and an empty building floods exactly like a full one. If anything it is worse: nobody is inside to notice the roof leak in week one, and no tenant reports that the air handling has been off for a month in August. Flood on a vacant building follows the same order we use everywhere else, covered on commercial flood insurance.

When a building is coming down to the studs, being expanded, or being converted from one use to another, the exposure is a construction exposure and the right form is builders risk, ISO form CP 00 20. Builders risk covers the building in the course of construction along with materials and supplies intended to become part of it, and it is written to follow a project rather than an operating building.

The part to diary is the end. Builders risk coverage typically ceases at the earliest of three events: 90 days after construction is complete, 60 days after the building is occupied in whole or in part, or when the property is put to its intended use. A center that starts taking tenants in phases can trip the occupancy trigger while the owner is still thinking of the job as in progress. The permanent commercial property policy has to be bound and in force at that moment, which means the conversation with the agent happens when the first certificate of occupancy is close, not when the last punch list item clears.

Two coverages belong in the same conversation. Ordinance or law matters on an older Florida building, because rebuilding an inline center to current code is not the same job as rebuilding it as it stood. And a construction delay caused by a covered loss is the gap an owner feels in the monthly debt service, which is what soft costs and delayed opening coverage are for.

Commercial mortgages routinely carry covenants about occupancy, insurance and notice. A lender holding a note on a center with a dark anchor tends to want three things: evidence that property coverage is in force at a limit it approves, evidence that the vacancy condition has been addressed, and its mortgagee clause intact on whatever policy is actually answering. Where a building moves onto excess and surplus lines paper for the vacancy period, the lender may need to approve the carrier, so start that conversation early rather than at the binder stage.

Liability does not disappear with the tenants either. An empty building still has a parking lot, a sidewalk, a roof and a back door, and premises liability and trespass exposures generally go up when a property looks abandoned. The general liability policy needs to know the building is vacant. Liability layering is covered on commercial general liability and commercial umbrella.

Underwriting a vacant building is mostly underwriting the things that keep an empty building from becoming a claim. The list is short and it does not change much by carrier.

Water. The largest source of vacant building losses that are not weather. A supply line to a restroom nobody enters, a water heater in a back room, an ice machine hookup left live in a departed tenant's space. Shut the water off at the source, or install a monitored shutoff. Where the sprinkler system stays live, it needs to be inspected on schedule.

Openings. Rear doors, roof hatches, overhead doors, ground floor glass and any opening a departed tenant cut into a demising wall. Secured, in a way that survives a look from the parking lot.

Electrical and HVAC. Panels labeled, unnecessary circuits off, exterior and life safety lighting kept on. In Florida some conditioning usually stays on, because a sealed building at ninety percent humidity grows mold with nobody there to smell it.

Inspections and the lot. Documented walkthroughs on a schedule, with dates and photographs. Lighting, mowing, trash and graffiti removal. A claim file with twelve dated inspection records reads very differently from one without any, and a building that looks maintained draws far less of the vandalism and trespass the vacancy condition just stopped covering.

• Address, year built, square footage, construction type, roof age and type.
• Rent roll or site plan, with the square footage of every space and which are in use.
• The date occupancy dropped, and the leasing or redevelopment plan with dates.
• Current declarations page and any vacancy endorsement already on the policy.
• Whether work is under way: permits, contracts, contractor and schedule.
• Protections: alarm, cameras, water shut off, secured openings, inspection schedule.
• Loss runs, and the lender's insurance requirements if the building is financed.

Dennis reads every application himself and responds within 48 hours, usually the same business day.

Apply for a vacant building quote

Dennis Hendrickson owns Hendrickson Insurance in Sarasota, Florida, FL License E095547, and managed shopping centers before he wrote insurance. Sources used on this page: Vacancy and commercial property coverage (IRMI); ISO form CP 04 50, Vacancy Permit; ISO form CP 04 60, Vacancy Changes; ISO form CP 00 20, Builders Risk Coverage Form. Form editions and carrier wording vary; the policy in force controls, and nothing here is a coverage opinion on a specific claim.