For example the standard homeowners policy  HO 3 and most commercial property policies insure against riot as a named peril. To prove damage by that peril the insured must submit a sworn statement in proof of loss, evidence of the extent of the loss, documentation establishing the value and extent of loss, and if requested submit to an examination under oath.

When a catastrophe, like a riot, occurs insurance regulators are most interested in causing the victims of the riot the least inconvenience in filing claims, and freeing the police to handle more pressing issues. That is also the intent of most insurers. The problem only arises when indicators or red flags of fraud are detected like:

• there is no damage to the structure where rioters are reported to have looted the contents;
• the insured delays the report of damage, theft or destruction by rioters;
• there is no video of the damage occurring although the premises was covered with a closed circuit video system on or near the premises;
• records presented do not comport with the business;
• the insured cannot describe what was in the premises before the riot;
• the insured was in serious financial difficulty before the loss;
• there is no report filed with the police;
• the report filed with the police is filed weeks after the damage caused by the riot;
• the first contact from the insured is from a lawyer.

With the pandemic, another red flag would be if the business owner had filed a claim for the pandemic and been denied. It would be tempting for someone to try to pad a current claim due to riots to make up for the lost income due to the pandemic.

Insurance is not a charitable organization. It is a contract where the insurer agrees to indemnify the insured against a contingent or unknown event from a peril insured against. If the insured's property is near the location of a riot but he or she cannot prove that the rioters caused damage to the property, the insurer may require an examination under oath, to allow the insured to prove that riot caused the damage by sworn testimony.

Regardless of the cause of loss, whether an accident, a riot or a fraud, the insurer is obligated to thoroughly investigate the claim presented by the insured before making a decision. Sometimes a police or fire report will be required. Other time, like Baltimore's CVS Pharmacy, the fire by rioters was obvious and shown multiple times on cable news shows. However, the extent of damage will require the services of a fire restoration contractor to determine the cost to repair or rebuild, the services of a salvor to inventory the goods remaining and undamaged, the work of a forensic accountant to determine the extent of damage and theft done by the rioters, a professional insurance claims adjuster and possibly the assistance of an insurance coverage lawyer.

Although the request of the Department of Insurance is made with good intentions the request to avoid presentation of competent proof of a claim can result in serious unintended consequences. Every catastrophe, whether by riot, flood, hurricane, tornado, or attack of the public enemy will always result in a percentage of fraudulent claims. For example life insurance claims were made by relatives of living people claiming they died in the World Trade Center, hurricane claims were made by people who lived in Minnesota but made claim for damages in Louisiana. If all claims were paid as presented because of the catastrophe the insurers would be made insolvent. Insurers should treat claims coming from a riot like any other claim, put the insured to their proof and thoroughly investigate the claim before making a payment.

 June 15, 2015