The recent wave of protests and civil unrest that has roiled the nation has, in some cases, led to dangerous conditions in major American cities.
Damage to business offices, stores and restaurants has been widespread. In Cleveland, for example, restaurants had only recently reopened, and were forced to close their doors again, jeopardizing their livelihoods.
Unlike their recent experiences with COVID-19-related claims in which insurers issued blanket denials, business owners are likely to receive insurance reimbursements for losses sustained during the protests. Vandalism is typically a covered peril under most basic property policies, which should allow for both the cost of repair, and, importantly, the replacement of lost income if the business was open and operational during the event.
The rate of lost income reimbursement, however, could be a point of contention. Given that most cities required a reduction in capacity, insurers will likely argue for a reduction in the available recovery of income based on the local caps.
This becomes an accounting exercise in which insurers will look at revenue over the last 12 months and compare similar periods to determine what a business could expect to earn. Forced shutdowns due to COVID-19 for the last 60 to 90 days complicate things even more because insurers will want to factor that time period of lost revenue into the equation.
For those businesses that were still shuttered by the virus, however, no coverage for loss of income would typically be provided. For those that were about to reopen, while it is unlikely that coverage would be made available, an argument could be made that income was about to be generated.
Protection of Property
Business owners are likely to face concerns over protecting their property and could have avenues within their policies that provide additional coverage for expenses related to the protection of property. The cost to move some items from the premises could indeed be covered, subject to policy conditions.
Safety of Employees
In those situations where employers were beginning to seek the return of their staffs, they are now faced with an additional consideration of monitoring local conditions for the safety of their people. However, shutting down voluntarily won’t trigger a business interruption claim in most cases.
If a governmental entity orders a business to close or obey a curfew and there has been physical damage to other buildings in the neighborhood, that business can file a claim through civil authority coverage, which is included in many policies. Fear, however, is not a property peril. Businesses that opt to close for reasons other than physical damage or civil authority won’t be eligible for an insurance reimbursement.
This is Not an Act of Terrorism
President Trump has called the events of the last few days acts of “domestic terrorism.” He and his administration have blamed Antifa (an anti-fascist movement) for the violence arising out of the protests and he has asserted on Twitter that he will designate Antifa as a terrorist organization. In effect this would mean that insurance companies could deny claims because of terrorism exclusions. However, it’s important to understand that a president does not appear have the authority to designate domestic terror groups. We are confident that insurers will not be able to hide behind terrorism exclusions.
As always, our team is standing by to report claims and help mitigate the potential losses you may experience.
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