Background

Moratorium

Coverage

Background

 Merriam Webster Online defines "riot" as "a situation in which a large group of people behave in a violent and uncontrolled way." This is certainly what has happened in Baltimore, where a CVS was burned and looted, a sixty-unit senior housing center under construction was destroyed, and more than 140 cars were burned and fifteen building fires were set by rioters. Some businesses were completely razed or were looted. As a result, Maryland called out the National Guard, and in a unique move, the Insurance Administration asked insurers not to call on city police for police reports in the handling of claims; the department requested carriers to use other sources of information since the police were involved in more serious matters.

 Generally, in claims concerning vandalism or property damage caused by others, the police are to be notified as part of an insured's duties after a loss. The CP 00 10, Building and Personal Property Coverage Form, states that the insured must notify the police if a law may have been broken. The HO 00 03, Homeowners Special form, states that the police must be notified in case of a loss by theft, and the PP 00 01, Personal Auto form, requires notification if a hit-and-run driver is involved. Many carriers go beyond these requirements and look for police reports to substantiate any claims of vandalism. The insurance department is requesting that carriers forgo this standard practice, and use other information to substantiate claims. Witness statements and the word of the insured combined with photos and news accounts are the most likely forms of substantiation the carriers will have available; without a police report, there is no real authoritative account of what happened. This opens carriers up to the risk of fraudulent claims, since without any formal report, and insured can claim extensive losses that may not have actually occurred.

 Moratorium

 Another unique move reported by the Maryland Insurance Administration is that six carriers have imposed moratoriums on new business in areas of the city affected by violence and destruction. This is highly unusual, as moratoriums are usually only seen when hurricanes are imminent. There are standards as to the force of the storm and how close it has to be to the state in order for carriers to be allowed to impose moratoriums, and it is common to see moratoriums in various states during hurricane season. The moratorium prevents a surge of applicants looking for coverage solely because they fear property destruction; this sort of adverse selection is not encouraged, hence the moratoriums.

 In this situation, since the governor has declared a state of emergency the Maryland code of Insurance § 2-115, Regulations during Major Disasters or Emergencies, is allowed. This regulation allows the commissioner to adopt regulations concerning submission of claims or proof of loss; grace periods for payment of premiums and performance of other duties by insureds; temporary postponement of cancellations, nonrenewals, premium increases, or policy modifications; procedures for obtaining nonelective health care services; time restrictions for filling or refilling prescription drugs; time frames applicable to an action by the commissioner under this article; and any other activity necessary to protect the residents of the state. The regulation applies to the line or lines of business to which the regulation applies; the geographic areas to which the regulation applies; and the period of time for which the regulation applies. Therefore carriers can apply moratoriums to areas of Baltimore that they feel are under threat of imminent danger.

 Coverage

 Unlike floods and other disasters, there is coverage for damage caused by riots under most policies. The homeowners policy excludes war, warlike acts by military force or personnel, civil war or insurrection, but none of these are the same as a riot, so coverage applies. "Insurrection" is defined as "a usually violent attempt to take control of a government," which is not the case in this situation.

 The personal auto policy also contains exclusions for war, insurrection or civil war, but not riots.

 The commercial causes of loss form excludes governmental action and nuclear hazard, as well as war, warlike action, insurrection and rebellion, but again, there is no standard exclusion for rioting.

 Likewise there is no exclusion for looting; "looting" is defined as "something that is stolen or taken by force," and since theft is the act or crime of stealing, looting is covered as well.