Well-reported incidents of rioting nationwide this year have resulted in extensive damage to business premises, inventory and other property. In addition, government-instituted curfews or shutdown orders have interrupted businesses, causing businesses to lose income.
During this trying time, one of the most common questions being asked from an insurance standpoint is “Do I need Terrorism coverage”? The fact that President Trump has suggested that he may label Antifa a terrorist group does not trigger coverage, as two things need to happen for coverage to be triggered:
- The event has to be certified an Act of Terrorism, which is defined as “any act certified by the Secretary of the Treasury, in concurrence with the Secretary of Homeland Security and Attorney General, to be an act that is dangerous to human life, property, or infrastructure and to have resulted in damage within the U.S. It must be committed as part of an effort to coerce U.S. civilians, or to influence either policy or conduct of the U.S. Government through coercion.” The definition includes both foreign and domestic terrorists.
- It must be proven that it was Antifa that damaged your store.
Keep in mind that despite everything that has gone on in the United States since 9/11 (Boston Marathon Bombing, shooting rampages at US Military Facilities, etc) the Secretary of the Treasury has never declared those events, or any others, to be a Certified Act of Terrorism.
Review Your Current Coverage and Needs
Many assume their insurance policies exclude riot-caused damage. Typically, this is not the case. Insurance coverage for property damage and lost income due to riots or civil commotion should be available under most commercial property insurance and business owner insurance policies. Absent special exclusions, these forms of property insurance provide coverage for a variety of losses, including destruction to store fronts and interiors, broken windows, stolen property, graffiti damage and, in most cases, the cost of debris removal.
In addition to property damage coverage, businesses forced to close as a result of riot damage may have coverage for business interruption. Likewise, it may be possible that lost income as a result of curfews could be available under the civil authority extension of coverage. While insurance companies so far have resisted paying for losses resulting from the coronavirus, business interruption caused by physical damage to property during riots is in a more conventional, and thus clearer, category of coverage.
Typically, commercial policies contain coverage limitations regarding business income coverage. Many require a “waiting period” of a certain amount of hours before a policyholder can begin claiming the benefits of coverage. The first three days of business shutdown, constraint of access by barricade, or limited operation because of other civil authority, such as curfews that shorten business use or hours, usually are excluded from coverage. Policies also might limit interruption coverage to short durations of, for example, monthly limitations.
Insurers might assert several exclusions. Additionally, some might try to assert a terrorism exclusion. Moreover, for damaged buildings empty for more than 60 days, insurers might raise vacancy exclusions — most notably, an exclusion for vandalism. Or for buildings under construction, some insurers may try and exclude coverage for pre-existing structures. Finally, insurers might assert overlapping virus exclusions as a bar to full loss-of-use restrictions from rioting.
It’s incredibly important to review your policy. Analyze coverage and applicable exclusions. An experienced insurance professional, or insurance coverage lawyer can help harmonize competing claims and exclusion, especially the complicated area of business interruption losses. Track all damage, expenses and lost income. Insurers will require detailed proof of loss as soon as practicable in a business interruption or property damage claim. Policyholders should consider setting up a separate accounting code to document insured losses.
Mitigate Damage
Policyholders should take reasonable steps to reduce damages — including installing new doors and windows (or boarding up windows). Damages enhanced by inattention at the site can limit coverage. Consider building or reviewing your emergency plan. A well-developed emergency plan and proper training could result in fewer employee and customer injuries and less structural damage to the business.
Contact our team to discuss your concerns or to get a review of your current insurance to see if you have the right protection in place.
Related Articles
- Protecting Your Business During Civil Unrest
- Plan Ahead for Security & Disaster Readiness
- Business Continuity Planning for Pawn Shops
- Terrorism Risk Insurance Act
- Business Interruption Insurance – Coverage in Action
- 6 Steps to Minimize Business Interruptions
- Is your Property Insurance Limit Adequate?
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