The spreading civil unrest across the country leaves many businesses vulnerable to property damage and loss of income. Most commercial property insurance program policies should provide coverage for some of these losses.
Commercial property insurance policies typically cover property damage caused by fire, riots, civil commotion or vandalism. The terms of property insurance policies vary widely depending on the policy owner’s level of investment. However, typical policy language provides:
We will pay for direct physical loss of or damage to “real property” and “personal property” at a “premises” directly caused by a “covered cause of loss.”
This language generally applies to damage to property resulting from civil disturbances.
Where property damage is so severe that the policyholder is forced to suspend business operations, ensuing business income losses may be covered by business interruption coverage, which is a common component of property insurance. A typical business interruption coverage form provides:
We will pay for the actual loss of “business income” you sustain due to the necessary “suspension” of your “operations” during the “period of restoration”. The “suspension” must be caused by direct physical loss of or damage to property at a “premises” at which a Limit of Insurance is shown on the Declarations for Business Income. The loss or damage must be directly caused by a “covered cause of loss.”
In many cases, coverage extends to losses of income that occur when a civil authority prohibits access to the policyholder’s property due to damage in the vicinity, such as when the police or fire department blockade an area in response to a protest or riot.
To the extent government agencies have spoken out on this issue it is to encourage insurance companies to pay out quickly. The California state insurance department, for example, issued a statement that it “is expecting adjusters to be on the ground as soon as possible to help any looted businesses quickly access their insurance benefits.”
As the situation develops both on the ground and in the world of insurance coverage, Kelley Drye will be monitoring closely and will provide updates in the event of a change in the policy landscape.