The vandalism and theft some small businesses experienced this past week have left business owners wondering if insurance will cover damage caused by civil unrest. We unpack it in this article.
Millions of people in all 50 states have participated in protests in response to the killing of George Floyd, racial injustice, and police brutality. While the majority of these protests have been peaceful, some businesses have been vandalized or destroyed due to result of civil unrest.
You’re likely covered If your business has been damaged by vandalism due to civil unrest, but the ongoing pandemic may complicate matters.
Is damage caused by civil unrest covered?
It depends on your specific policy, but most likely. Civil unrest and the resulting vandalism or theft are covered by almost all commercial insurance policies that include building property coverage.
“Unless vandalism, riots or similar acts are excluded under the policy, then there’s coverage.” said Evan Walker, a property damage attorney.
Most business owners are required by their lease agreements to have a Business Owners Policy (BOP), which bundles the most common property protection and liability risks.
“As far as property damage and stolen merchandise, I’ve never seen a commercial lease that did not require the tenant get insurance for those things,” said Dana Delman, partner at business and real estate law firm Delman Vukmanovic LLP.
BOPs usually cover damage to property, furnishings, equipment, and inventory caused by civil unrest, vandalism, or malicious mischief.
What about broken windows?
Damage to windows may not be covered under a basic insurance policy, as this coverage is often sold separately. Check your specific policy.
“One-size fits all policies don’t tend to cover plate glass,” said Dan Struck, partner and insurance practice chair at law firm Culhane Meadows.
It may depend on your relationship with your agent.
“If you can trust your insurance agent, you will likely be adequately protected,” Delman said.
Is our company car covered?
Company cars are covered by business auto insurance, not commercial building insurance. But if you have comprehensive coverage, damage to the car will be covered.
What about business interruption insurance?
According to the Insurance Information Institute, most BOPs have business interruption insurance, which covers loss of income from an event that disrupts a business’ operations. But the current pandemic is likely to complicate things for small business owners filing business interruption claims.
“It’s going to be a much harder argument to make that if your business was already closed and is still subject to a closure order, that it suffered any business income loss because of looting. The insurers are very likely to take the position that the income loss was from the prior uncovered loss [of COVID-19],” Struck said.
Insurers may also choose to calculate business interruption claims off of projected revenue, rather than past revenue, posing additional challenges to business owners.
“Insurers may absolutely look at projections and say there’s no way you would have had the same income as 12 months ago because you can’t operate at the same capacity right now,” Struck said.
Some policies have a civil authority provision, which covers the lost income of businesses whose premises are blocked by authorities during civil unrest or riots. Keep in mind that if you’re eligible for a business interruption claim, there is often a waiting period before this kind of coverage is applicable. Review your policy carefully for any potential exclusions.
Am I on the hook for damages or is my landlord?
Most landlords require that leases have insurance to cover damages, but it depends on your lease agreement.
“If the building burns down or if there is serious structural damage, absolutely. There are definitely situations where the landlord is on the hook,” Struck said.
But for damages beyond the common areas and to the structure of the building, the tenant is most often liable for damages. Business owners should examine their policies and speak with their landlords.
If your business has been damaged by vandalism, here’s what to do:
- Report the damage to the authorities and obtain a police report
- Document all the damages with photographs and inventory reports
- Record lost income and expenses
- Make a claim with your insurance company ASAP
- Mitigate further damages by securing the property
Business owners should carefully examine their own policies — and seek professional help if need be.
“It’s important to review the policy and make your own determination as to what is covered, whether with the advice of counsel or not. It’s really important — especially now — to know what’s in your policy,” Struck said.
Lastly, be tenacious. “Given the timing of these events, be prepared for some pushback from the insurer, but stick with it,” said Struck, as final advice to business owners.