Christina Phillips | Property Insurance Coverage Law Blog | June 27, 2016
Buildings that are vacant or unoccupied for extended periods of time present an increased risk of damage from theft and vandalism, especially in an urban setting such as Chicago. Recognizing this increased risk, most property insurance policies contain a vacancy provision which excludes coverage for losses resulting from vandalism, theft and other specified hazards if the building was vacant for more than 60 consecutive days before the loss. But what happens if the building was vacant when you purchased it? Does the prior owners’ vacancy count against the 60-day period?
This is the situation faced by an insured several years ago in a case entitled West Bend Mutual Insurance Company v. New Packing Company.1 New Packing owned and operated a meat packing business in Chicago, Illinois insured by West Bend. Thereafter, New Packing purchased a warehouse which, at the time of its purchase, had been vacant for more than 60 consecutive days. West Bend issued an endorsement to the policy adding the warehouse facility as an insured property, effective the date of closing.
Within days of the closing, the warehouse was vandalized on two separate occasions for which New Packing submitted a claim to West Bend. West Bend denied the claim citing the policy’s vacancy provision which provided that losses resulting from vandalism, theft, and other specified hazards were excluded if the building in which the losses occurred “was vacant for more than 60 consecutive days before such loss.” Litigation ensued which ultimately resulted in the parties filing cross motions for summary judgment on the applicability of the vacancy provision.
West Bend appealed the trial court’s grant of summary judgment for the insured, claiming that the vacancy provision should apply because the warehouse had been vacant for more than 60 consecutive days before the vandalism losses occurred. The insured took the position that the 60-day period did not begin to run until the effective date of the endorsement to the policy adding the warehouse as an insured property.
The appellate court disagreed with the insured’s interpretation, stating that the vacancy provision of the policy defined the vacancy period retrospectively, whereby the days of the vacancy are calculated by looking back from the date of loss, rather than looking forward from the effective date of coverage. Notwithstanding this ruling, the court did find that the vacancy provision could not be relied upon given that the West Bend had an opportunity prior to issuing the endorsement to inspect the premises to determine if it was vacant. Specifically, the court noted that West Bend could have chosen not to underwrite the risk or it could have provided coverage at an additional premium. The court concluded that West Bend could not claim a violation of the vacancy provision where it took no steps to discover whether the building was vacant.
1 West Bend Mut. Ins. Co. v. New Packing Co., 2012 IL App (1st) 111507-U (This order was filed under Illinois Supreme Court Rule 23 and may not be cited as precedent by any party except in the limited circumstances allowed under Rule 23(e)(1)).