A building can be full of valuable equipment, personal property, and activity yet still be “vacant” under many modern commercial policy definitions. A recent federal decision out of Alabama drives home the point that “vacant” in the commercial property context has nothing to do with the amount of equipment and personal property at the insured premises. 1 Instead, these cases turn on the facts demonstrating “customary operations.”
The case involved Randall Scott Nelson and his business, Scott’s Motorcycle Service, a long-running operation that had been forced to shut down after Nelson developed serious health issues. The property remained insured under a commercial policy issued by Frankenmuth Mutual Insurance Company. When a pipe burst in late December 2022, causing significant water damage, Nelson submitted a claim expecting the policy to respond. Frankenmuth denied the claim, relying on the policy’s vacancy provision.
At first glance, the insured’s position had a certain intuitive appeal. Nelson argued that the building was anything but vacant. The 4,000-square-foot shop was filled with tools, inventory, customer motorcycles and ATVs, and equipment accumulated over decades of business. Utilities were active. Cameras monitored the premises. Nelson himself regularly visited the property, working on personal projects and maintaining the space. A sign on the door even indicated the business was temporarily closed due to illness, but not permanently shut down. From a common-sense perspective, this was not an empty or abandoned building.
But insurance policies are not governed by common-sense impressions alone. They are governed by the words in the policy’s definition sections.
The Frankenmuth policy contained a vacancy condition that defined when a building is considered vacant. Because the policy was issued to the owner of the building, the entire structure was deemed vacant unless at least 31 percent of the square footage was either rented to a tenant conducting “customary operations” or used by the owner to conduct “customary operations.” The policy also stated that if the building had been vacant for more than 60 consecutive days before the loss, the insurer would not pay for certain types of damage, including water damage from a burst pipe.
The question was not whether the building contained property. It was not whether Nelson cared for it, visited it, or maintained utilities. The question was whether the building was being used to conduct Scott’s customary operations during the 60 days before the loss.
The insurer pointed to Nelson’s own testimony, which established that the business had ceased operations in May 2021. There were no paying customers in 2022. The shop generated no income. No repair work was performed for customers. The property was not leased to anyone else. It was not under renovation or construction. By the time of the December 2022 loss, more than a year and a half had passed since the business had functioned in any meaningful commercial sense. Under the policy’s definition, the insurer contended, the building had been vacant well beyond the 60-day threshold.
Nelson’s response focused heavily on the property’s physical condition and his continued connection to it. He argued that “customary operations” were not defined in the policy and were therefore ambiguous. He maintained that his periodic presence, the continued storage of business equipment, and his ongoing work on personal and occasional items should qualify as continuing operations. He also emphasized that the building was fully stocked and operational, with respect to its infrastructure, arguing that a reasonable jury could find the property was not vacant.
The court was not persuaded. Applying Alabama law, the court began by emphasizing that when a policy provides a specific definition, that definition controls. The vacancy provision did not ask whether the building was empty; it asked whether it was being used for customary operations. The court rejected the attempt to import a lay understanding of “vacant” into a policy that carefully defined the term.
The court then addressed the argument that “customary operations” was ambiguous. It concluded that the phrase was not ambiguous in context and could be understood according to its ordinary meaning. Importantly, the court looked at what Scott’s Motorcycle Service did when it was operating. It repaired motorcycles and serviced customers. That was its customary operation. By Nelson’s own admission, none of that was occurring in the months leading up to the loss.
The insured’s evidence, while extensive, missed the mark legally. The presence of tools, inventory, and equipment showed that the business had not been stripped or abandoned, but it did not demonstrate that the business was being conducted. The court noted that Nelson described his activities as “tinkering” on personal projects and helping friends, not running a functioning motorcycle repair shop. That distinction proved decisive. Storage and occasional personal use are different from conducting the insured business.
Timing sealed the outcome. The loss occurred on December 26, 2022. Therefore, the relevant 60-day period began around late October 2022. The record contained no evidence that Scott’s Motorcycle Service conducted its customary operations during that period. Without that evidence, there was no genuine dispute of material fact. The vacancy exclusion applied as a matter of law.
The decision is a textbook example of how policy language and facts must align. Nelson presented compelling evidence of the property’s physical condition, but it did not align with the operative policy language. The insurer, on the other hand, aligned the policy’s definition with the insured’s own testimony about the cessation of business operations. That alignment is what wins cases.
Vacancy provisions in many commercial policies are not about whether a building is empty. They are about whether the insured risk, the business activity itself, is ongoing. When that activity stops, even temporarily and for understandable reasons, coverage can quietly disappear long before a loss occurs.
I suggest others interested in the vacancy issue and definitions read Developers, Commercial Owners, and Property Managers Need to Be Aware of Vacancy Clauses, Vacancy Is Not the Same as Occupancy, and The Standard Fire Policy 60-Day Vacancy/Unoccupancy Condition.
Thought for the Day:
“Alabama has a history of making progress, one step at a time.”
— Condoleezza Rice
1 Nelson v. Frankenmuth Mut. Ins. Co., No. 2:24-cv-01277 (S.D. Ala. Mar. 20, 2026). See also, Frankenmuth Motion for Summary Judgment, Nelson Response to insurer’s Motion for Summary Judgment, and Frankenmuth Reply.
