Am I Covered? - Protests, Riots, Vandalism, Looting, and Civil Commotion
By Dan Tharp, CIC, RWCS
2020 was the most bizarre year that most of us can remember. Phrases we had never heard before — like “social distancing” — have become part of our everyday speech. Less than a year ago, if we had worn a mask into a bank we would have been arrested, and now if we enter a bank without a mask we are asked to leave. When events or tragedies marked by any tinge of controversy made headlines, it was all too often followed by the destruction and theft of property.
Many business owners learned this the hard way this past year. On May 26, riots broke out in Minneapolis after George Floyd died at the hands of police. Shortly after, riots and looting spread to 140 other U.S. cities. The civil disorder during that two-week period caused an estimated $1 billion in insured losses in more than 20 states.
While civil disturbances, vandalism, and looting are significant risks for many businesses, business owners can protect themselves by purchasing commercial property insurance. Riot, civil commotion, and vandalism are covered causes of loss under virtually all commercial property policies.
What constitutes a riot, civil commotion, and vandalism?
Almost all policies I have reviewed fail to include specific definitions for the terms “riot,” “civil commotion,” or “vandalism.” The frequent result is a difference in how an insured business owner may construe these words, compared to the insurance carrier. When this discrepancy occurs, the courts often rely on common dictionary definitions or, when available, previous court findings and judgements to determine the meanings of these terms.
The word “riot” generally means an unlawful disturbance of the peace by a group of three or more people who act in a violent manner that threatens the public or an institution. A “civil commotion” is similar to a riot, but simply involves more people. Civil commotion generally means an uprising by “a large number of people” who cause harm to people or property. Because riot and civil commotion can be difficult to differentiate, they are generally listed together. “Vandalism” refers to the intentional destruction of someone else’s property, such as breaking glass and damaging property.
All of these are criminal acts and the penalties imposed on the perpetrators vary from state to state.
FINANCIAL IMPACT ON YOUR BUSINESS
Riots, civil commotion, and vandalism can impact your wash in several ways: • Rioters or vandals may cause physical damage to your wash or business personal property. • Rioters may break into your premises and loot your personal property, including your inventory or merchandise. • You may lose income if rioters or vandals damage your property and you are not able to operate at your normal level (or at all) until the repairs are completed. • You may suffer an income loss if property near your premises is damaged and local government closes off access to the entire area to protect the public.
Physical Property Damage
If you have insured your business property under a commercial property policy, you should be covered for physical damage caused by riots, civil commotion, or vandalism. These perils are covered under most named perils and all-risk policies.
If your building is damaged, the loss will be insured under your building coverage. The coverage would also include damage to your business personal property (stock, inventory, equipment, etc.). Note that any losses that occur will be subject to the limits, co-insurance, and deductibles listed on your policy. These should be reviewed annually with your agent.
Looting (a type of theft) is also a covered peril under commercial property policies. The definition of looting varies from state to state but the term typically denotes theft that occurs during a time of public catastrophe or unrest, such as a flood, riot, civil disorder, or war.
Loss of Income
If you are unable to continue operating your wash because of damage to your premises by rioting, looting, or vandalism, you may be covered by business income (also called business interruption) insurance. This coverage is not always included in commercial packages and you should consult your agent to see if it is included with your coverage. Business income insurance covers the revenue you lose while your business is partially or completely shut down and your property is being repaired. If you have purchased a suite of insurance coverage known as
Business Owners Policy (BOP) this coverage is automatically included.
Business income coverage is subject to a waiting period, which is commonly 72 hours.
Business income insurance also includes a coverage called Civil Authority. This coverage applies when a civil authority (such as a fire department) prohibits access to your premises because property nearby has been damaged by a covered peril, and you lose income as a result. For coverage to apply, the damaged property must belong to someone other than you and it must be located within a one-mile radius of your premises.
ANNUAL POLICY REVIEW
All commercial insurance policies are subject to deductibles, exclusions, and other variables that may affect coverage. I recommend a thorough review of all your commercial policies at least once per year. That review should include the following: • Analysis of the cost of all your buildings, structures, and equipment based on current market replacement costs to rebuild. • An inventory of all business personal property and the replacement cost. An easy way to think of Business Personal Property is this: If you took your wash and turned it upside down, everything that falls out would be considered Business Personal Property. • Business income analysis to ensure that your revenue is protected for as long as repair of your property may take. In a geographic area where construction is not feasible through winter months, that may be up to one year of needed coverage.
Dan Tharp, CIC, RWCS, is the vice president of business insurance lines for Pearl Insurance. Dan has been assisting business owners protect their operations, customers, and employees for more than 25 years. For questions regarding this article or any other insurance matter, he can be reached at (800) 447-4982, e-mail firstname.lastname@example.org, or visit pearlinsurance.com/automotive.