Vacancy/Occupancy Clauses in Property Insurance


Adjusters International Disaster Recovery Consulting

25 years in publication

Vacancy/Occupancy Clauses in Property Insurance — An Often Overlooked but Significant Limitation

By Robert J. Prahl, CPCU

The vacancy and occupancy provision in insurance policies often is not recognized by insureds until a loss occurs and is denied by the insurer. The provision, which is commonly found in commercial property and homeowners policies, has been the source of frequent litigation.

Although dictionary definitions of the terms vacant and unoccupied vary slightly, “vacant” typically means empty, having nothing in it, devoid of contents . “Unoccupied” ordinarily means without occupants, but with furniture and personal effects being present. The term implies a temporary...


In everyday use, the terms “vacant” and “unoccupied” are often taken to mean the same thing. When it comes to recovering from an insured property loss involving a premises determined to be one or the other, however, the differences between the two not only become apparent, they can be significant. Add the fact that policy provisions for coverage can vary — and be subject to interpretation by the courts —and the need for a clear understanding of vacancy/occupancy clauses is obvious.

An equally strong case can be made for better understanding how protective safeguards endorsements work. While they might offer businesses a premium discount when attached to their policy, they also carry responsibilities for seeing to it that loss-deterring devices such as fire and theft alarms are functioning as they should—and consequences when they are not.

In this issue of Adjusting Today, experienced insurance claims professional and respected author Robert J. Prahl, CPCU, examines both of these subjects in an enlightening discussion of each. It is valuable information for owners and managers, agents and brokers, and all who have an interest in protecting a property in today’s business world.

Sheila E. Salvatore Editor