The following material is provided for informational purposes only. Before taking any action that could have legal or other important consequences, speak with a qualified professional who can provide guidance that considers your own unique circumstances.
Riots. Looting. Vandalism. Civil commotion. The violent incidents that ignited nationwide and worldwide over the past few months turned otherwise peaceful demonstrations into frightening confrontations between protesters and civil authorities. Caught in the middle were innocent business owners who saw their companies disrupted, damaged, or destroyed. Property and income losses across the United States soared into the multi-millions of dollars, and some business owners simply couldn’t withstand another disaster on the heels of the Corvid-19 pandemic. It was the last straw that drove them out of business.
So, how would you fare if your design firm was the victim of violent civil unrest? Would your commercial property be covered by insurance if damaged or destroyed by an intentional act of looting, arson, or vandalism? What about the loss of business income that would occur and the extra expenses incurred to get your company back on its feet and able to deliver services to clients? And is there anything you can do to prevent the targeting of your firm or at least minimize losses and damage? Let’s take a look at some of these risk management questions.
Yes, You Should Be Covered
The good news is that if you have a typical commercial property policy, coverage includes perils such as riots, looting, and vandalism. Coverage typically includes damage caused by the rioters, arsonists, looters or vandals as well as damage caused by the police or other authorities responding to the civil commotion. The question remains, though: How much coverage do you have (considering policy limits and deductibles), and what exclusions might exist?
Your commercial property policy may not define each type of peril individually but instead lists them together under broad terms that define covered perils. The broad terms apply whether you have a “named perils” policy or a “special form” policy.
Coverage exclusions for this group of perils rarely appear in commercial property policies. If not explicitly excluded, the peril can usually safely assume it is covered. There is one notable exception. Some commercial property and business owner policies (BOPs) exclude coverage for the breaking of plate glass doors and windows. If so, you may want to purchase plate glass coverage separately. Check your specific policy language for plate glass or other exclusions.
Note, coverage most likely for claims arising from civil commotion damages is under your auto policy rather than your commercial property policy. Check your comprehensive auto coverage and the limits, exclusions, and deductibles that may apply to this type of damage.
Minimize Losses – Coverage for Physical Damage
What types of physical damage resulting from civil unrest would typically be covered by a commercial property policy? Among others:
- Broken windows and doors (and the cost to board them up)
- Destroyed or looted furniture and equipment
- Fire damage to the building and contents due to arson
- Defacement to the building due to vandalism
- Damaged or stolen fixtures
- Virtually any personal or commercial property destroyed, stolen, or damaged during the unrest.
It is comforting to know that a standard property policy should cover most physical damage to your business and a quick review of policy language should confirm that fact. But coverage for physical damage is only half of the equation when it comes to losses related to civil unrest. Sometimes, the lost business income in the wake of a civil disturbance can outweigh the physical damage.
Minimize Losses – Business Income and Extra Expense Insurance
Business income and extra expense insurance should cover lost revenues that result when the physical damage from civil unrest prevents you from conducting business.
For purposes of business income insurance, business income includes:
- The net income a company would have earned had business not been interrupted, plus
- the on-going expenses, such as utilities and rent that continue during the business interruption.
Generally, for business income coverage to come into effect:
- It must be necessary for you to partially or entirely curtail business operations due to the damage.
- The loss must be caused by physical damage to the building as a result of a covered peril.
- If the premises damaged are identified/described in your commercial property policy.
Notice that you do not need to own the damaged premises or property for business income insurance to come into effect. If you rent your offices from a property company, for example, you likely qualify for business income coverage if you have insured your personal property under a commercial property policy.
Business income insurance should continue to provide coverage through the “restoration period” — the duration of time required (or that, in the insurance company’s estimation, should be required) to repair the damaged property. The policy may include an initial waiting period before BI coverage kicks in. This waiting period is typically 48 to 72 hours.
Often included with business income insurance is extra expense insurance. Extra expense covers added expenses that occur and required to continue your business following property damage. Expenses can include the costs of renting replacement space, equipment, and furniture while you replace or repair your property.
Coverage may include Civil Authority coverage in your business income policy. Civil Authority coverage would cover losses caused by civil authorities closing down streets or otherwise prohibiting you from accessing or occupying your company premises even though there may be no physical damage to your building. Typically, however, there must be an order to evacuate due to damage caused by a covered peril to a neighboring premise that is not part of your company. Civil authority coverage is typically good for up to one week to one month of lost income.
Minimize Losses – Preventive Measures In Troubled Times
Even a single vandal can cause considerable damage to your company’s premises. And when mob mentality prevails in a mass looting or full-scale riot, there is little business owners can do to prevent the disturbance from impacting their companies. Indeed, it is best in almost all cases to concentrate your efforts on making sure your employees and other business associates remain safe and leaving the defense of your premises to the proper authorities.
Still, there are preventive measures businesses can take to reduce the chances of being targeted by arsonists, vandals, and looters during a riot or civil commotion. Consider the following:
Maintain your outside grounds. Make sure the exterior of your building and surrounding landscaping do not invite troublemakers onto your premises. For instance, ensure your building and parking areas are well lit. Use commercial security systems with alarms and cameras. Consider hiring a security service to monitor your property. Keep shrubbery, trees, and other plants adequately pruned so that they don’t provide attractive hiding places. Store your garbage bins away from your building, locked up, or fenced off. Trash dumpsters and garbage cans are favorite targets for setting fires and smashing doors and windows.
Focus on street-level doors and windows. Heavy-duty metal or wooden doors and gates can serve as effective deterrents against intruders. Similarly, break-resistant glass can make it more difficult for a perpetrator to enter your building. Reflective windows that limit a potential looter’s vision of your building’s interior may urge them to seek another target if they can’t see the potential loot inside.
Don’t put your expensive goods on display. Companies love to show off their fancy new computers, their expensive artwork, their lavish furnishings, and other signs of wealth and success. These items are often the first thing you see when entering commercial offices. Realize, though, that those displays may be an invitation for vandals and looters to destroy or steal your prized possessions. Perhaps placing your most expensive belongings in a less conspicuous, more secure interior area of the offices may make sense. Safes, cameras, and alarms also provide good interior security and protection.
Train your employees. Civil unrest can be sparked instantaneously by a single sudden event, as we witnessed recently. It is critical that employees know what to do in the event they are suddenly in the center of dangerous destruction or violent confrontations. Make sure employees know the safest evacuation routes and gathering spots away from the building as well as areas to shelter in place inside the premises. Assign a manager to spearhead this training effort. Meet with local authorities for guidance, and call them in at the first sign of trouble should a disturbance brew.
Back up your computer network. Should your business go up in smoke or otherwise be ravaged by looters, arsonists, or vandals, you’ll want to be prepared to restore your business records and operating systems as soon as possible. Having an offsite back-up computer system will be crucial to your recovery. Fortunately, there are many options available in today’s cloud-based world.
Work with your business neighbors. Many residential areas have “neighborhood watch” organizations. Homeowners meet on a regularly scheduled basis to discuss security issues such as recent crimes or suspicious activities. Some invite police representatives to attend their meetings. Businesses can do the same in commercial areas. You and neighboring companies can share information, keep an eye out for each other, keep the local police informed of suspicious or criminal activities, and perhaps make your area less attractive to ne’er-do-wells.
Contribute to your community. Companies who actively support the local community through volunteerism and charitable giving can build up considerable goodwill. That goodwill may pay dividends during times of civil unrest.
Limit valuables. Limit the amount of cash, and other valuables necessary for company operations kept on the premises. Should intruders penetrate your building, the less cash and cash equivalents to find is best.
In the Aftermath
Despite your best efforts, you may find yourself a victim of a civil disturbance, suffering physical property damage. If so:
- Get any employees or business associates who are on the premises to a safe location.
- When it’s safe, preserve your property. Cover broken windows and doors with boards. Save and photograph the damaged property to show your claims manager.
- File a claim with your insurance agent. If possible, make the report within 24-hours of the event.
- Track all expenses you incur in your recovery effort.
- Estimate and document your lost income during the restoration period.
- Keep in contact with your agent throughout the process. Document your conversations.
Safety Above All
Unfortunately, the hijacking of peaceful protests calling for justice and equality by individuals with less honorable intentions may occur. These rioters often take their anger out on local businesses and are bent on looting, burning, or otherwise destroying commercial properties, both large and small.
As a business owner, your priority should be the health and safety of your employees, clients, and other associates. Then you can worry about your commercial and personal property and the restoration of your businesses.
Insurance plays an integral part in your restoration and recovery. It can help you repair and replace your damaged physical property, restore your lost income, and cover the extra expenses needed to get back to business. Work with us to determine your current level of insurance coverage in the event of civil disorder and decide whether you need additional coverage to provide adequate protection.
Can We Be of Assistance?
We may be able to help you by providing referrals to consultants, and by providing guidance relative to insurance issues, and even to certain preventives, including the development and application of sound human resources management policies and procedures.
Please call on us for assistance.
We’re a member of the Professional Liability Agents Network (PLAN).
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Contact us at 800-969-4041 or click here to request a confidential evaluation of your insurance policies and risk management needs.
We may be able to help you by providing referrals to consultants, and by providing guidance relative to insurance issues, and even to certain preventives, including the development and application of sound human resources management policies and procedures. Please call on us for assistance. We’re a member of the Professional Liability Agents Network (PLAN). We’re here to help.