Just as colleges near the end of their academic school years, a wave of student protests and their encounters with campus and local law enforcement have created discord and, in some cases, major disruptions to higher learning. Indeed, several college campuses across the nation have reported a significant impact from the escalating discourse, including vandalism and other property damage. A few of them have even announced that they will cancel or modify graduation ceremonies, leading to further economic loss beyond school grounds. At the time of this alert, local law enforcement agencies across the nation have begun actively dismantling tent cities and other encampments erected by protestors on campuses.
Fortunately, impacted policyholders can look to their insurance policies to help absorb their fortuitous losses. Common commercial policies may provide coverage for losses due to “riots, civil commotion or vandalism” as well as to the reactions of police and other authorities to such events. Commercial property policies may provide coverage for damaged property as well as economic loss due to business interruption. Specialized insurance, such as event cancellation coverage, if purchased, may also provide coverage for losses associated with the cancellation of special events.
Event cancellation coverage
Any school that cancels or postpones its graduation or commencement ceremony due to the protests may have coverage for those losses. Vendors that contracted to service these events may also have coverage for losses arising from the cancellations.
Event cancellation insurance covers lost revenue and costs or expenses if an event is canceled or postponed due to an insured peril. Some policies provide coverage for specific perils, and coverage can be purchased for civil unrest. Other policies are all-risk, and as such may be triggered by any cause not specifically excluded. These policies usually have shortened notice requirements so policyholders should immediately contact their broker to confirm coverage and tender a claim for loss.
Civil authority coverage
Civil authority coverage, typically included in business income coverage under commercial property insurance policies, 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 a finite period, usually 30 to 60 days. To the extent that governmental entities issue orders aimed at curbing the protests, coverage may also be triggered under these provisions.
Property damage
While there have been limited reports of property damage relating to the protests, it is a common aspect of civil commotion. Most commercial property insurance policies cover damage to buildings and property at campuses caused by “riots, civil commotion or vandalism.” Policyholders should itemize any property damage suffered in preparation for submitting a claim. Policyholders should also make sure to document any damage they may suffer with photos or, preferably, video.
Business interruption coverage
Most property policies cover an owner’s lost business income following physical loss or damage, such as that caused by vandalism, while the policyholder repairs, replaces or restores that property. This coverage is often subject to a waiting period, typically 72 hours. Detailed financial information regarding the policyholders’ operations is essential to supporting business interruption claims, and policyholders should make sure that they have these documents available. Insurers may request historical financial information, including as far back as one to two years prior to the loss.
Contingent business interruption coverage
Graduation ceremony cancellations could lead to contingent business interruption issues, particularly for hotels and vendors that count on graduation ceremonies for their business.
Commercial property policies frequently include contingent business interruption (CBI) coverage (also referred to as contingent time element or dependent business coverage), which covers lost revenue, including loss of net income, continuing expenses and extra expenses, due to the shutdown of a third party that impacts a company’s ability to do business as usual. CBI losses are only covered if they are covered by the policy, and generally are subject to lower sub-limits. Some policies only cover named locations; others are blanket policies covering all customers and suppliers. Impacted policyholders should review their coverages with their broker and/or coverage counsel.
Extra expense coverage
Campuses that face extra expenses, such as for increased security, barrier rentals and other efforts to ensure the safety of the protestors and the protection of property, may have insurance available to help cover those costs.
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 to secure the property and prevent further damage or to prevent harm to others while the property is being repaired.
Tips following a loss
- Locate and review complete copies of all policies
- Provide timely notice to carriers
- Document losses
- Investigate and document any property damage or loss, including vandalism
- Prepare to calculate losses
- Detail and retain documents relating to all business activities
- Gather business history, benchmarks, projections and forecasts
- Notify authorities of any potentially criminal activity
- Contact an experienced insurance coverage attorney
Client Alert 2024-098
