Is Looting/Criminal Rioting Covered by Insurance?
As recent events of civil unrest, rioting, and looting occur, business owners across the nation are concerned about their company and their property. After being closed for several months or operating at limited capacity due to COVID-19 regulations, business owners are already feeling some strain. Now they are watching the news and asking themselves – will my property be covered by insurance if rioting and looting cause damages?
The simple answer is, yes. Most standard business insurance policies typically cover damage that is a product from rioting, looting, and vandalism, and/or civil commotion. This includes damage caused by rioters and the reactions of law enforcement during the event. [4] Although each policy is different, it is recommended that the policyholder contact their insurer or insurance company to get more details about their specific policy and coverage.
What To Do If Your Business Is Affected By Looting/ Criminal Rioting?
If there is an incident, then the business owner needs to contact their insurer immediately and gather as much information and documentation as possible. According to American Property Casualty Insurance Association, gathering the following information will help expedite the process:
Report the Claim Promptly
The policyholder needs to report their claim as soon as possible so the process can begin, immediately.
Document the Damage
When visiting the damaged property, take pictures and/or video of the damage and try to preserve any property from further damage or weather. This is so the insurance adjuster can see the property and make an adjustment for the claim accordingly. Be sure to attach all gathered documentation with the report of the claim to turn in.
Prevent Further Damage
Before making temporary repairs, check the property for safety hazards and take steps to prevent further property damage when it is safe to do so. DO NOT MAKE PERMANENT REPAIRS UNTIL THE INSURANCE ADJUSTER HAS INSPECTED THE PROPERTY AND DAMAGE. If temporary repairs are to be made on the property keep all receipts to present to the insurer and the insurance company.
Claims Handling Accommodations for Social Distancing
Due to COVID-19, insurers, insurance companies, and adjusters have implemented the use of virtual tools to help in the claims handling process. This is to protect all parties involved from the risk of exposure to COVID-19, as safety is the first priority. However, there are a few exceptions where an in-person inspection is required, but all social distancing protocols must be followed during the adjustment claim. Contact your insurer, insurance company, or adjuster for more details on their protocol and what to expect during this time.
For Repairs Only Work with Reliable Professional Repair Contractors
When hiring a repair contractor ask your insurance company if they have any referrals, contact your local chamber of commerce, or local Better Business Bureaus to gather and verify references. Secure multiple written bids from contractors and communicate with your insurance adjuster before committing to signing a contract. [1]
Business Interruption Coverage
Furthermore, a standard business policy usually covers loss of income, also known as business interruption coverage, if the income loss results from physical damage to the premises caused by a riot or civil commotion. Even if the business was shut down or operating at limited capacity due to regulations of the COVID-19 pandemic, the income loss will be determined based on a 12-month assessment of the operation’s income. [2]
This coverage varies by insurer, so it is important and recommended that the business owner reads their policy and talks with their agent, broker, or insurer to understand their specific policy coverage. Business interruption coverage helps replace lost income when a business is covered when physical damage such as theft, fire, wind, falling objects, or lightning damages the business’s property. [3]
Each claim is different and will be evaluated on its distinctive terms and facts within the policy. To get more information regarding your policy, it is recommended that you contact your insurance company or agent for details.
What If Your Claim is Denied?
A worry every business owner has when submitting a claim is the chance that it might get denied. If that happens, what do you do? For example, your business property was damaged while in the designed riot zone during the civil unrest as stated by the local government. In order to submit the claim, you gather all the needed documentation and anxiously wait to hear a response from the insurance company only to find out that the claim is denied. You are confused as to why as your policy states that rioting and looting are covered, your property is within the zone, but the claim was still denied. Fortunately, that does have to be the end of the road. If your claim is improperly denied you can take legal action.
In a previous appellate court ruling, Kent Insurance Company vs Glades Liquors, the insurer’s liquor store was looted while in the designated riot zone during a civil disturbance in Dade County in May 1980. The police report concluded it was just a burglary and had nothing to do with the riot, causing the damage not to be covered under the insurance policy. The Florida Third District Court of Appeal reversed and remanded a partial summary judgment holding for the insured. It was noted by the Court that “although the crime occurred during, and in the geographical area of the riot, it does not follow as a matter of law that the riot was the direct and proximate cause of the loss.” Id. at 1102. Further, the Court reasoned that “a mere showing by the insured that his loss occurred within the wide area of the county designated as a riot zone does not relieve him of his burden to show that the loss comes within the provision affording coverage for direct loss at the immediate place of a riot.” Id. 1103.
Justice Baskin, in his dissent, noted that he failed “to understand how it can be said that a theft, which occurred within an area designated by police as a riot area, does not fall within the coverage of riot insurance, especially when the riot conditions required all of the stores in the area to close and to evacuate their personnel.” Id. at 1103 (Baker, J., dissenting). [5] This case further proves that the type and size of the business, local or national, is not the determinant but rather the exact wording within the business policy purchased is the decisive factor.
For further information about your business policy and specifics of the coverage contact your insurance agent or company to review the entirety of your policy.
History in The Making – How 2020 is Transforming the Insurance Industry
History is unfolding before us in the recent current events bringing forth many challenges. One challenge for insurers will be figuring out how to compensate policyholders for lost income following the weeks or months of closure during the COVID-19 Pandemic for businesses. [9] Most insurance policies exclude business interruption claims that were caused by a virus. These issues are being evaluated by law firms across the country and there is no clear answer yet. However, this is something that is unfortunately not a quick process as it is predicted that the insurance industry will need to take time to adjust to the situation and comprehend the events that are occurring. However, experts within the insurance field are looking back at history to create an accurate picture of how this will change the industry.
Another current event that is sweeping across the insurance industry are the protests that have occurred over the past few weeks. Throughout the nation, the George Floyd protests are making history with about 750 cities across all 50 states (as well as other countries participating in the protests) each with over 100 participants. [8] Although most of these events have started out as peaceful protests, some have resulted in riots and looting of both local and national businesses. According to an Associated Press news agency tally, more than 10,000 people across the states have been arrested during the George Floyd protests. [10] The outcome of the stolen property and damage is uncertain as information is still being gathered and unlike past protests, these are nationwide and not centralized to one location, making it a unique situation. Multimillion-dollar corporations have insurance policies to cover the events occurring, however, a more localized small business might not have the excess amounts of money to fix their property due to the income loss they have already been subjected to due to the COVID-19 regulations.
Remembering the Rodney King Protests
The most comparable civil unrest insurance loss event is the Rodney King riots in Los Angeles in 1992. These riots happened after four police officers were acquitted in the beating of Rodney King, becoming the largest riot-related insurance loss, according to the Insurance Information Institute. At that time insurers paid policyholders $775 million in damages, which now is valued at $1.4 billion according to the Bureau of Labor Statistics’ inflation calculator. [9] The Los Angeles County District Attorney in 1992, Ira Reiner, stated at the time there had been only about 7,000 riot-related arrests during the 1992 riots. [7] The substantial increase in locations participating and the sheer volume of the 2020 riots means that one can predict that the George Floyd protests are going to produce exponentially higher riot-related insurance losses than Rodney King.
The Insurance industry is facing new challenges due to both the civil unrest and the COVID-19 Pandemic. As history unfolds before us, businesses are navigating situations the best they can. Experts are predicting how this will change the future of the insurance industry all while dealing with the business interruption and rioting or looting claims. Through all of the unknown, it is important to remember that if your business is affected by civil unrest, you should first contact your insurance agent, broker, or company immediately. If you are affected by the riots, be sure to collect documentation and protect the property from further damage. If you are fortunate that your business is not affected by the current events, it is still recommended you contact your insurance agent, broker, or company today to review your policy. It is also important to remember that a denied claim does not mean that it is the end of the road, legal representation can also be sought.
Written by:
Shay McMullan
Law Clerk
WATTS GUERRA LLP
Four Dominion Drive, Bldg. Three, Suite 100
San Antonio, Texas 78257
Phone: (210) 447-0500
Frank Guerra
Board Certified – Personal Injury Law
Texas Board of Legal Specialization
WATTS GUERRA LLP
Four Dominion Drive, Bldg. Three, Suite 100
San Antonio, Texas 78257
Phone: (210) 447-0500
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