In a sad commentary on the state of race relations in some parts of the country and ongoing tensions between citizens and the police, Charlotte, North Carolina, protests after a recent shooting escalated into rioting in the streets.
Like the riots in Baltimore in 2015, many victims of the violence are small-business owners whose properties are unfortunately located in the line of fire.
When the dust settles — in days or weeks — those property and business owners will be looking to their insurance companies to help make them whole.
“Businesses with claims should contact their insurance professional as soon as possible. In addition, they should take steps to safeguard their business, including boarding any broken windows to prevent looting,” said Loretta Worters, vice president of the New York City-based Insurance Information Institute.
In some cases, coverage will be under a commercial general liability policy while other coverage may be available under a business owners' policy, although coverage may be more limited.
Worters provided the following overview of the five main types of insurance that will be important in the aftermath of the riots:
A woman emerges from a storefront following damage from overnight protests stemming from Tuesday's police shooting of Keith Lamont Scott in Charlotte, N.C. (Photo: Gerry Broome/AP Photo)
|1. Property damage
In most cases, business owners whose property is damaged by riot or civil commotion and looting are covered. The “rioting” definition covers looting by participants who steal merchandise or other property from the premises, as well as fire and vandalism.
Depending on the policy, a business may also have glass coverage if the glass store front has been destroyed by the riots. Some policies require the purchase of plate-glass-window insurance as an additional coverage.
An entrance to Bank of America Stadium is shown on Thursday after a second night of violence following the fatal police shooting of Keith Lamont Scott on Tuesday in Charlotte, N.C. With Charlotte in a state of emergency because of protests, it raises the question of whether coaches and players think the game should be moved or postponed for the safety of all involved. (Photo: Chuck Burton/AP Photo)
|2. Business interruption
Businesses that must suspend operations or limit their hours because of rioting will have coverage on their business interruption (also known as business income) policy if there is direct physical damage to the premises of such magnitude that the business must suspend its operations.
Coverage depends on the individual policy, but typically begins after a waiting period of 24 to 72 hours and lasts for a period of two weeks to several months, depending on what the business owner opted for when purchasing the policy. Typically, business interruption reimburses a business owner for lost profits and continuing fixed expenses during the time that a business must stay closed while the premises are being restored because of physical damage from a covered peril.
Physical damage to other property that prevents customers or employees from gaining access to the business is also covered, although subject to a similar waiting period of 24 to 72 hours.
Reductions in business income associated with fear of traveling to a location, in addition to closure to areas by authorities because of a heightened state of alert, would not be covered by business interruption policies. These are the kinds of losses businesses in Miami faced over the summer with the threat of Zika virus, and businesses around the Gulf Coast expected after the Deepwater Horizon oil spill, for example.
National Guardsmen stand on the street in downtown Charlotte, N.C. on Thursday. (Photo: Gerry Broome/AP Photo)
|3. Civil authority
If civil authority — that is, the police, fire department, state or local government, or a military authority — keep people away from an area, there is generally coverage for lost business income and extra expense through a civil authority endorsement (which typically is purchased separately). In North Carolina, for example, Gov. Pat McCrory declared a state of emergency and began the process toward deploying the National Guard and the state Highway Patrol to assist local police.
Coverage includes curfews and other restrictions on access to a place of business, and usually begins 72 hours after the time of the first action of civil authority. Again, there has to be either direct damage to the covered property or property adjacent to the premises as it is described in the insured’s policy. The coverage time period most commonly stated in this endorsement is either 14 or 30 consecutive days.
A plywood board covers a broken glass panel on Thursday at the NASCAR Hall of Fame after a second night of violence following Tuesday's fatal police shooting of Keith Lamont Scott in Charlotte, N.C. (Photo: Chuck Burton/AP Photo)
4. Extra expense insurance
Extra expense insurance reimburses your company for a reasonable sum of money that it spends, over and above normal operating expenses, to avoid having to shut down during the restoration period. Usually, extra expenses will be paid if they help to decrease business interruption costs.
In some instances, extra expense insurance alone may provide sufficient coverage, without the purchase of business interruption insurance.
Demonstrators protest Tuesday's fatal police shooting of Keith Lamont Scott in Charlotte, N.C., on Wednesday. (Photo: Chuck Burton/AP Photo)
|5. Other coverages
Individuals may also have some coverage for theft, looting or fire under their auto insurance policies, if they have optional comprehensive coverage
Generally, theft from looting and damage to a residence from rioting also would be covered by homeowners or renters insurance.
“These riots are a reminder to business on the need for business interruption insurance,” said Worters. “Each day a business remains closed is another day of lost revenue.”
For more information about business insurance, business owners can go to the business section of Insurance Information Institute’s website.
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Rosalie Donlon
Rosalie Donlon is the editor in chief of ALM's insurance and tax publications, including NU Property & Casualty magazine and NU PropertyCasualty360.com. You can contact her at [email protected].
