Last week, Houston’s Fourteenth Court of Appeals examined a commercial property policy’s vacancy clause and construed it in favor of coverage.  In ACGS Marine Ins. Co. v. Spring Ctr., Inc., 2014 WL 1713938 (Tex. App.—Houston [14th Dist.] Apr. 29, 2014), ACGS Marine insured a business park consisting of eleven buildings inside a single fenced property.  One of the buildings was broken into and stripped of wiring and suffered other damage associated with the break-in and the removal of the wiring. ACGS denied the claim after it learned the building had been vacant for four months.  The insured sued ACGS Marine, with the chief issue being the question of whether the policy’s vacancy clause applied to each of the eleven buildings individually, or only to the entire property collectively.

The vacancy clause used both the phrase “the building or structure” and the phrase “covered location.”  The term “covered location” was defined by the policy’s Location Schedule as the single street address encompassing all eleven buildings.  The court also noted that at least one other portion of the policy used the phrase “each building or structure,” while the vacancy clause did not. Therefore, applying Texas law, the court found the insured’s construction was not unreasonable and, because the property as a whole was not vacant, ACGS had incorrectly denied the claim. 

This result provides an important underwriting lesson that care should be taken when writing coverage for properties with multiple buildings and the carrier should always be clear as to whether it is insuring one location with several structures or multiple locations at the same street address.

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