civil unrest and commercial property coverage

On the heels of a number of deaths committed by police, protests broke out throughout the country. While most of the protests have been peaceful, rioting and looting have taken place in several cities, including most recently in Kenosha, Wisconsin, in the wake of Jacob Blake’s shooting. Many small businesses that have property damage as a result of the civil unrest are looking to their Commercial Property policies for remuneration.

Standard Commercial Property policies generally automatically cover a business’s property damage and lost inventory as a result of a riot and civil commotion. But it’s important for an insured to understand that there are different limits for different issues. For example, a business’s shattered windows and vandalized exteriors during the rioting and looting would be covered under its building coverage. The business’s inventory would be covered for a separate limit under the business personal property coverage in the policy.

What About Loss of Income?

Beyond the property damage that businesses have suffered, the civil unrest in the streets of American cities has also caused loss of income for many shop owners that were already financially reeling from closures due to the pandemic. After being closed for months, many businesses reopened only to be shuttered again by looters and vandals. Typically, if a business suffered actual physical damage to the property and was forced to close for repairs or rebuilding, it would be covered for its loss of income with Business Interruption (BI) insurance.

Some in the industry warn, however, that the double-hit of the pandemic (which is not covered under Business Interruption insurance) and looting could mean BI claims would become more complicated down the road, with coverage possibly becoming more expensive.

The insurance payouts as a result of the rioting and looting over the last several months are yet to be tallied, as the civil unrest in some parts of the country is very much alive. Back in June after the riots in the wake of George Floyd’s death, an industry analyst interviewed by Bloomberg, said, “P&C insurers such as AIG, Chubb and Travelers may see manageable losses from riots across the U.S. possibly topping $2 billion, in our view, given the broader geographical exposure than previous unrest.” To put this in perspective, the 1992 riots in Los Angeles were the costliest civil-disorder event in U.S. history up to now, totaling about $775 million in insured damage at the time, according to the Insurance Institute.

After a Loss

Businesses should immediately report civil-commotion-related property damage to the police and contact you, their agent, to file a claim with the insurer. They need to also take measures to protect their property from further damage (e.g., hammering sheets of plywood in place to cover shattered storefront windows). Commercial Property policies will typically cover the expenses needed to protect the covered property from further losses.

In addition, advise clients to plan ahead for a disaster, particularly in today’s climate. Employees should know what to do in the event of a riot, including steps to take to protect the business (boarding up stores, rolling down metal shutters, hiding valuables) and themselves.  It’s also wise to review your insureds’ policies and which coverages will respond (and how much) in the event of a loss due to civil unrest.