Tag Archives: Riots

FAQ: Riots and Business Insurance

Riots across the U.S. and the subsequent damage to thousands of businesses have many business owners asking what their business insurance policies will cover. In this interview, Triple-I Vice President of Media Relations Loretta Worters answers some frequently asked questions about business insurance and what it covers.

Are businesses covered for property damage from riots?

Yes, they are. Business property that has been damaged by riot, civil commotion. vandalism and fire are covered under virtually all businessowners and commercial insurance property policies. This typically includes damage to windows, doors, light fixtures, store windows and plate glass on office fronts. There is also coverage for the contents of the building such as furniture, office supplies, computers or machinery that may be either damaged or stolen.

Should a business insure its building and contents at replacement value or actual cash value?

A business may have the option to insure its business property at replacement value or actual cash value. The difference is that replacement value coverage can help a business replace its property at market prices, whereas actual cash value coverage takes depreciation into account. Replacement value coverage costs more, but it also pays out more in the event of a claim.

What about loss of income?  

Businesses that are forced to suspend operations or limit hours due to rioting, vandalism or civil commotion and have coverage for the loss of income under business income insurance (also known as business interruption, or BI) do have coverage. Coverage is typically triggered if there is direct physical damage to the premises.

What if a business is unable to access its property due to a government order? If there is a curfew in place, how will that impact a business?

While insurance policies vary, typically there is business interruption coverage for civil authority orders, such as curfews (when a business has reduced hours) or when a business is unable to access its property due to a government order requiring the business to close. Such coverage nearly always requires the existence of property damage within some limited geographic radius surrounding the policyholder’s location. This often ranges from 1 to 10 miles. Typically civil authority coverage has a waiting period of 24 to 72 hours, depending on the policy, before a policyholder can begin claiming the benefits of coverage. Coverage typically lasts up to four weeks, but the time period can be extended by paying an additional premium. However, once a curfew is lifted and business can resume, coverage ceases. 

Is business income coverage subject to a deductible?

Under most policies, business income coverage is subject to either a waiting period, which acts like a form of deductible or a monetary deductible. 

How will the amount of the business income loss be determined for a business?

Under most policies, business income coverage includes both net income (the profit a business earns after expenses and allowable deductions) and the cost of continuing normal operations.

What information does a business need to support its business income claim?

Most insurers require the following:

  • Profit and Loss statements
  • Sales records
  • Income tax returns
  • Rent or mortgage statements
  • Payroll records

What if a business vehicle has been damaged in a riot?

Damage to vehicles is covered under the optional comprehensive portion of an auto policy. This provides reimbursement for damage to the vehicle and its contents caused by fire, falling objects, vandalism or riot. Comprehensive coverage also reimburses a business if the vehicle’s windshield is cracked or shattered. Some companies offer glass coverage without a deductible.

Any advice for business owners?

Know your risks! Every smart business owner recognizes that business insurance is an essential element of an overall business plan. It should be factored in with fixed operational expenses like utilities. Without adequate coverage, business owners may have to pay out-of-pocket for costly damages from a riot, hurricane or other disaster, which could spell financial ruin.

Disasterproofing Social Media

About a year ago, we posted on the increasing use of social media in disasters.

A survey from the American Red Cross had shown that web users increasingly rely on social media to seek help in a disaster, and expect first responders to be listening.

Fast forward to today and according to L.A. NOW, a blog at the Los Angeles Times, a summer marked by social media-fueled riots in England and flash-mob violence in a number of U.S. cities, including Philadelphia and Cleveland, has prompted a debate about a social media crackdown.

L.A. NOW reports that rioters in and around London used BlackBerry messages to plan attacks, leading British Prime Minister David Cameron to suggest shutting down access to social media for anyone suspected of using it for criminal activity.

And after a large flash mob disrupted a Fourth of July fireworks display with violence here in the U.S., the Cleveland City Council passed an ordinance that would have made it illegal to use social media to organize a violent and disorderly flash mob. The mayor eventually vetoed the measure, citing First Amendment concerns.

Also, just last week officials at the Bay Area Rapid Transit District (BART) shut down its cell phone service to disrupt a protest over the shooting of a homeless man.

This raises an important question of whether officials legally can crack down on social media.

According to L.A. NOW:

Legal experts say police face a delicate balance when cracking down on social media — and prosecutors would have to meet a high bar to show that irresponsible, even reckless tweeting amounts to a crime.†

Across the Pond, an article in the London Guardian newspaper makes the point that police thwarted planned attacks on the Olympics site and stores in Oxford Circus, after gleaning intelligence from encrypted social messaging sites such as BlackBerry Messenger and also Twitter.

The Guardian also says police had considered switching off certain social messaging sites, but discovered they did not have the legal powers to do so.

In the words of acting Metropolitan police commissioner, Tim Godwin, cited by The Guardian:

We did consider seeking the legal authority to switch it off. The legality is questionable, very questionable.†

What do you think?

Riots And Insurance

Riots in London and other major cities across the United Kingdom have left many individuals and businesses with damaged or destroyed property.

The latest from the Association of British Insurers (ABI) puts the estimated insured losses from the urban unrest at well over  £100 million ($163 million). Check out this Business Insurance article for more details.

Watching the destruction unfold online and on TV I had to wonder, if a similar outbreak were to occur near my U.S. home, would  I be covered?

The good news is that standard homeowners insurance policies generally cover a wide range of potential disasters, including fire, riot or civil commotion, and vandalism or malicious mischief. This I.I.I. chart lists what type of disasters are covered.

Of course, it’s always best to check your individual policy for coverage details and exclusions.

As for U.S. businesses, commercial policies generally cover riot-related property damage.

When it comes to business interruption coverage, insurance will compensate you for lost income if your company has to vacate the premises due to disaster-related damage that is covered under your property insurance policy, such as a fire. However, if a business is forced to close early due to a city-imposed curfew, business interruption coverage would not apply for the lost income.

While rioting is rare, when it does occur, the damages can be costly to both people and property. The 1992 Los Angeles riots in the wake of the Rodney King verdict caused some $775 million in insured losses and still rank among the largest U.S. manmade disaster losses.

It’s interesting to note that U.S. property insurers of last resort, also known as FAIR plans, were born out of legislation passed by Congress following the 1967 urban riots.

More on the history of property insurance pools and riots can be found in the I.I.I. issues update on Urban Insurance.