As we all move ahead together during these unprecedented economic times, our focus shifts in new directions to ensure future success, and as a result, things that are considered the new norm don’t raise red flags in the same way they used to pre-pandemic.  It’s now more important than ever to make sure that your commercial insurance and risk management program are structured properly to cover the new risks we face today.


Changing Occupancy Levels / Tenant restructuring

New challenges in the commercial real estate world (such as the work from home trend and the increase in purchase of goods from online providers) have changed the way property owners, managers and developers do business.  The retail sector has been hit especially hard; tenant retention is of the utmost importance.  Occupancy levels of retail shopping centers are at an all-time low.  You might not be aware, but your insurance policy likely includes language that restricts coverage for low occupancy properties.  In general, from a landlord’s position/building’s owner, a location (as defined by your carrier) is considered vacant when less than 31 percent of the total square footage is no longer being occupied by the business owner, a lessee or a sub-lessee.


What happens with my policy if I have a vacant location?

From the point of view of an insurance company, vacant properties present additional risk in the form of vandalism, theft and more. This makes them less desirable to underwriters —hence the inclusion of language / new endorsements restricting coverage for low occupancy properties. If damage occurs to a commercial space that has been vacant as defined by your policy, a vacancy clause may be triggered, which means that the following types of damage or loss will no longer be covered at all, and payments for other losses could be reduced by 15% or more:

  • Vandalism, including glass breakage
  • Water damage, including sprinkler leakage (unless specifically protected against freezing in the insurance policy)
  • Theft and attempted theft

How to minimize risks

Fortunately, underwriters have been understanding of the current situation many businesses have found themselves in and are willing to work with policy holders on amending coverage. If the occupancy level of your asset is below 30% and you fear that a vacancy clause might be triggered, contact your broker at Odell Studner to review your options. You may have an opportunity to amend the policy and extend coverage.



Other ways to minimize business risk

It’s important to protect your company against risk and you can do this with a thorough risk assessment. By understanding you’re the risks your company faces, you can take steps to avoid or minimize them. Odell Studner can help! To get started with a risk assessment, reach out today to learn more!