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Commercial Insurance Coverage for Damages from Civil Unrest

Updated: Nov 16

By Matthew R. Bickford, CPCU, ARM


Among the many challenges facing our nation this year, 2020 has seen historic divide on political and societal fronts. As the nation awaits the results of the election, many businesses are boarding up storefront windows in preparation for potential civil unrest and insureds may be wondering the extent of their insurance protection for such unrest. This article describes potentially relevant coverages and policy provisions.


Property Damage


Commercial property policies are written on either a “named perils” or “all-risk” basis. Policies written on a “named perils” basis provide coverage for losses caused by perils identified in the policy, while “all-risk” policies cover losses caused by any peril not specifically excluded. Both types of policies should provide coverage for property damage caused by riots, vandalism or looting, but a “named perils” policy must specifically include these exposures. Losses under both types of policies are likely subject to a per occurrence deductible. Most policies typically exclude insurrection, revolution or civil war, but these terms describe much larger-scale events.


In addition to coverage for physical damage at your own property, many policies include civil authority coverage which provides coverage in the event your business is interrupted due to covered damage to other property within a specified distance of your property.

Theft of Money

Insureds who suffer loss of money or securities due to looting or robbery may be able to recover their losses under the premises section on their Crime Policy. Banks that suffer losses from robbery should similarly seek recovery under their Financial Institution (FI) Bond.


Premises Liability


Among the scariest scenarios is violence erupting at your place of business. Unless an exclusion has been added, the ISO Commercial General Liability form covers liability for failure to protect customers during civil commotions. While there is an expected or intended injury exclusion, it usually includes an exception for bodily injury resulting from reasonable force to protect persons or property. An example of this exception is where a security guard uses reasonable force to protect a bank's property or a patron. Excessive force claims can be more challenging from an insurance coverage standpoint. The most prudent course of action is to contact and fully cooperate with law enforcement authorities in addressing the situation.

Factual Issues that May Affect Coverage

Does your policy define an “occurrence”? As noted above, coverage for property damage is usually subject to a per occurrence deductible. Some liability policies also have per occurrence deductibles. If multiple losses occurred at different properties or at different times, the number of deductibles could materially affect insurance recovery. Courts have wrestled with the meaning of “occurrence” in past cases when insurance policies do not specifically define.

Does the event constitute “terrorism” and how is that term specifically defined within your policy? Generally, it describes an act committed to coerce the civilian population or the U.S. government. Unless terrorism coverage was purchased, insurance policies may exclude terrorism. If only TRIA coverage is included on your policy, the event would have to be “certified” by the Secretary of Treasury and this generally requires more than $5 million in total damage before coverage is triggered.

Closing


We hope that Americans come together and that citizens remain peaceful and civil toward one another in the coming days. While we all maintain this hope, it would be prudent to verify coverage under your insurance policies.




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