Riot and civil commotion exposures: Stories from recent unrest
Protests present an opportunity to help small-business policyholders understand the scope of their commercial property coverage.
Protests have made headlines across the nation in recent weeks. The New York Times reported recently that somewhere between 15 to 26 million people in the United States have participated in the protests over the last few weeks, peaking on June 6 with a half million people in nearly 550 locations across the country. While the majority of protests were peaceful, rioting and looting broke out in a few cities.
In Minneapolis, rioters broke into The Town Talk Diner & Gastropub, one of the area’s most popular diners. They raided the bar, removed hand-painted banquettes and scorched pillows, which triggered the sprinklers. In Los Angeles, restaurants and bars across the city were looted and vandalized, leaving these businesses in a precarious position.
Riot and civic commotion coverage is automatically included in all standard admitted commercial property insurance policies, but the country is not accustomed to the widespread looting and vandalism we’ve recently experienced. As a result, most business owners likely hadn’t given the coverage much thought until now.
Over the past month, peaceful protests have continued while the looting has largely faded away. Unfortunately, the damage had already been done to many small businesses in inner cities.
Business owners, who were shocked by the scale and length of the rioting and looting, have been calling their insurers to confirm their coverage and to try to increase the limits on their policies. This presents an excellent opportunity for insurers, agents and brokers to help small business policyholders understand the scope of their commercial property coverage, add any necessary coverage enhancements, and discuss risk management for riots and civil unrest.
What is covered?
One of the most frequently targeted businesses during the riots has been liquor stores. For example, a business we will call ABC Liquor Store sits in the heart of a major city. During the course of a large protest, the shop was vandalized and looted.
As a tenant, ABC Liquor Store was covered for its own inventory and the renovations made to the property itself. Of course, if the business owner was also the property owner, they would have had coverage with sufficient limits to protect the structure of the property as well.
Generally, lost inventory and damages to the business are covered under riot and civil commotion policies, but there are different limits for different issues. ABC’s windows were shattered, and the exterior was vandalized with spray paint. This damage fell under their building coverage policy. When their liquor was stolen and smashed and their dividers and counters were damaged, these losses were covered under a separate limit in their business and personal property insurance.
ABC Liquor Store also had recently upgraded its décor, and, unfortunately, suffered damage to a new TV. This triggered improvements and betterments coverage. Lastly, looters stole a small collection of baseballs autographed by the local Major League Baseball team. For this loss, ABC was covered under a separate limit for their fine art and memorabilia coverage. Though they did not suffer any fire damage, it was determined that ABC Liquor Store would have also been covered in case of a fire caused by the civil commotion.
Though we received numerous calls and claims for property damage related to looting, business owners have also made cases for business interruption coverage. If there is actual physical damage to property and the business was forced to close, then policyholders would be eligible for coverage. In the case of ABC Liquor Store, they were covered since the damages were severe enough that they would be closed to customers for the immediate future.
What can business owners do?
ABC Liquor Store will be able to return to business because their insurance policy covers the majority of the extensive damages they suffered in recent weeks. Ensuring policyholders secure the right coverage is a critical step, but agents and brokers can also do more to guide their clients in the right direction, including:
- Plan ahead: Business owners should have a disaster and business continuity plan ready and communicate frequently, so staff knows how to respond during rioting.
- Secure the business: Take inventory, board up stores, roll-down metal security shutters if possible, and hide any valuables in advance of any possible looting.
- Protect the property after a loss: Report the damage to the police and report the damage to their insurer. Then, take steps to protect their property from further damages. Insurance policies can cover the expenses needed to protect the covered property from further losses.
As their policyholders inquire about riot and civil commotion coverage, agents and brokers need to emphasize that even though limits can be increased, the insurer is not required to pay that full amount in the event of a loss. The intent of the insurance is to make a business owner whole in the event of a loss, so the insurer will pay the cost to repair or replace items up to the specified limit. That said, it might be helpful for agents and brokers to review common claim scenarios and best practices to better understand the coverage so they can properly respond to their clients in challenging times.
Recent weeks have seen unprecedented rioting and protesting that have placed business owners in uncertain situations. Now is an ideal time for agents and brokers to check in with their policyholders to confirm not only that they have sufficient coverage, but that they understand it and know they have the support of their insurer when times get rough.
Paul Martinez is program manager and insurance brewmaster for Brewery PAK Insurance Program. Martinez has 20+ years of commercial insurance experience and 10 years of experience underwriting breweries. He can be reached at 888-386-5701 or Paulm@pakprograms.com.
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