South-Western Legal Studies in Business

A Building Being Renovated Treated Same as Building under New Construction

California high court held that an “under construction exception” to a “vacancy exclusion” that limited coverage would apply to building renovations just as it applied to new construction, hence the vacancy exclusion did not apply when damage occurred during renovation.

Topic Insurance
Key Words

Under Construction Exception; Vacancy Exclusion

C A S E   S U M M A R Y

Owners of a building obtained property insurance from Fireman’s Fund. The policy contained a vacancy exclusion that stated if damage occurred to a building vacant for more than 60 consecutive days before the loss, there was very limited coverage. Buildings under construction are not considered vacant. The building was vacated at the end of December. In April, a tenant agreed to a long-term lease that required renovation. In June, a contractor began work. In July, a waterline burst causing significant damage. The owners were denied their claim due to the vacancy exclusion. The owners sued, but lost at the district court and appeals court level. They appealed to the California high court.


Reversed and remanded. An exception to an exclusion in an insurance policy is construed broadly in favor of the insured. When a policy provision is ambiguous and is subject to more than one reasonable interpretation, it will be construed in favor of the policy holder. The under construction exception to the vacancy exclusion was not limited to new construction, but contemplated all building endeavors, whether new construction, renovations, or additions that require the presence of workers at the premises. Since the building was under construction it was not vacant, and the policy was in force.


TRB Investments v. Fireman’s Fund Insurance, 145 P.3d 472 (Sup. Ct., Calif., 2006)

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