On April 29, 2014, the Texas Court of Appeals in ACGS Marine Ins. Co. v. Spring Ctr., Inc., 2014 Tex. App. LEXIS 4581 (Tex. Ct. App. Houston 2014) issued a decision examining a Vacancy Clause in a commercial property policy. Spring Center’s property, a business park, is comprised of a management office staffed during normal business hours and eleven buildings leased to various businesses. On August 13, 2012, one building in the business park that had been vacant for approximately four months was broken into and stripped of electrical wiring. The break-in also caused major damage to the interior offices and exterior doors.
Spring Center had purchased a commercial property policy from ACGS Marine Insurance Company providing property coverage for its business park. The ACGS Policy contained a Vacancy Clause barring coverage for loss caused by attempted theft or vandalism occurring while the building has been “vacant for more than 60 consecutive days” or “the usual or incidental unoccupancy of a ‘covered location,’” whichever is longer. The policy defined “unoccupied” to mean, in relevant part, as follows: [. . .] Unoccupied means the customary activities or operations at a “covered location” are suspended, but business personal property has not been removed. The building or structure will be considered vacant and not occupied when the occupants have moved, leaving the building or structure empty or containing only limited business personal property.
ACGS denied coverage on the basis that the Vacancy Clause applies separately to each of the eleven buildings in the business park. Spring Center filed suit and contended that ACGS’ denial was improper because the Vacancy Clause’s reference to “covered location” requires that all eleven buildings collectively be vacant in order for the clause to apply.
The court’s analysis focused on the term “covered location,” defined by the policy to mean “any location where ‘you’ have buildings, structures, or business personal property covered under this coverage. However, if the Scheduled Locations Endorsement is added to this policy, ‘covered location’ means a location that is described on the Location Schedule.” The Location Schedule appended the policy only contained a single location: 22820 Interstate 45 North, Spring, Texas 77373, identified as a “Building.”
The court reasoned that while it was undisputed that the subject “building” was vacant for 60 days, it was also undisputed that the entirety of the “Building” located at 22820 Interstate 45 North was not vacant for more than 60 days before the theft occurred. The court reasoned that it was not unreasonable to interpret the vacancy portion of the condition to require that all buildings located at 22820 Interstate 45 North, the only “Building” specifically identified in the policy, be vacant before the condition excluded coverage. Accordingly, the court held that Vacancy Clause did not apply to Spring Center’s claim.