Property damage, including buildings and business property
Most commercial property insurance policies cover damage to buildings and business property caused by riots, civil commotion, and vandalism. Under an all-risk property policy, all risks of direct physical loss to business property are covered unless specifically excluded. Other property policies provide coverage for certain named perils, unless otherwise excluded. While landscaping, signs not attached to the building, and some types of property such as fences may be excluded, there is often limited coverage subject to sublimits provided under coverage extensions.
Protection of property coverage
Under “protection of property” coverage, businesses may be able to recover for costs to move property to a different location to protect it, and then to return it to its original location. Some policies have broader coverage for expenses for actions businesses take to temporarily protect or preserve property from these types of losses. This type of coverage is generally subject to sublimits.
Business interruption coverage
Most property policies cover lost business income following a physical loss or damage, such as that caused by looting or vandalism, while the policyholder repairs, replaces, or restores that property. This coverage is often subject to a waiting period, typically 72 hours.
Extra expense coverage
Most property policies cover extra expenses businesses incur to continue operating while the damaged property is being repaired, replaced, or restored. This could include, for example, expenses related to hiring security or other safety measures, such as boarding up broken windows to secure the property and prevent further damage or to prevent harm to others while the property is being repaired.
Civil authority coverage
Civil authority coverage, typically included in business income insurance, may cover lost business income and/or extra expenses resulting from a governmental order, such as a shutdown order, curfew, or roadblock, due to physical loss or damage to nearby properties. Typically, this coverage is subject to a waiting period, generally 24 to 72 hours, and lasts for 30 days.
Exclusions insurers may assert to avoid coverage
Most policies covering riot or civil commotion events lack applicable exclusions. Regardless, insurers may attempt to argue that exclusions bar coverage. Insurers may claim the vacancy exclusion bars coverage for businesses that have been closed for more than 60 days before the vandalism or theft occurred due to COVID-19. However, the vacancy exclusion usually applies to vandalism and malicious mischief coverage, but not to riot or civil commotion, so property damage due to riots, civil commotion, and vandalism should not be excluded. Insurers may also attempt to assert that virus exclusions bar full coverage for civil authority orders following riots, civil commotion, and vandalism. Another exclusion insurers may seek to invoke excludes seizure or destruction of property by order of a governmental authority. Terrorism endorsements may also impact coverage due to the presence of Antifa members following President Trump’s comments designating it a terrorist organization. Importantly, insurers bear the burden of proving that any group bore responsibility for the damage, and this will prove difficult.
Tips following a loss
- Take reasonable steps to protect the property from further damage
- Locate and review complete copies of all policies
- Provide timely notice to insurers
- Notify authorities of potentially criminal activity
- Document losses
- Preserve damaged property
- Take photographs and videos
- Check inventories for stolen or destroyed property
- Prepare to calculate losses
- Detail and retain documents relating to all business activities
- Gather business history, benchmarks, projections, and forecasts
- Contact an experienced insurance coverage attorney for questions regarding coverage
If you have any questions about the content of this article or your company’s coverage for losses due to riots, civil commotion, and vandalism, please contact one of the authors of this article or any other member of Reed Smith’s Insurance Recovery Group.
Client Alert 2020-393
