Are Damages to Businesses from Riots Covered Under Property Insurance Policies?

Sill shares insights into damages resulting from riots and discussed potential coverage under commercial property insurance policies.

Typically, most of my friends regard our business, insurance claims management on behalf of insureds, with resounding disinterest at best. My “day at the office” is generally low on the list of topics brightening a Saturday evening with friends and often simply disregarded altogether.

That was until 2020, the year of “What’s Happening Now and What’s Next?” Suddenly, and paradoxically for valid reason, phone calls, texts, emails and the contact form from Sill.com are streaming in at record levels - from the onset of COVID-19 to the protests that spawned looting and riots.

This is not a forum for rehashing the politics, science, prejudice and other intersecting factors resulting in the perfect storm of catastrophic imperfection. Suffice to say, nevertheless, we are eager participants in the battle against the pandemic virus and additionally share in the calls, make that cries, for equality and justice.

What has filled my working days is answering the question:

Are damages to businesses from the recent riots covered under property insurance policies?

In short, the answer is usually “Yes” without hesitation. Because Sill, the nation’s leading public adjuster, exclusively represents policyholders in property damage and loss claims, I will limit this discussion to damaged buildings, personal property and lost business income also referred to as Business Interruption (and exclude coverage with respect to damaged automobiles).

Rioting, civil commotion, and vandalism are all covered perils under virtually every business owners and commercial property “All Risk” and “Named Peril” policies. More specifically, under modern “All Risk” commercial policies, all risks of loss, except those specifically excluded, are covered by policies. Riots, civil commotion and vandalism are not generally excluded.

Additionally, “Named Peril” policies technically are captured  on loss form CP 10 10, which provides coverage for the perils named in the chart to the right.

Damage to windows, doors, light fixtures and other building parts should be covered under the building property coverage included in the policy. It should be noted, however, that while glass is usually part of the covered property and built into the base rates as long as it is part of the building, it is possible that some policies will have special glass endorsements.

Damaged or stolen furniture, liquor, food, glassware, office supplies, computers, machinery, etc., basically everything except for the building itself, should qualify for coverage under the business owners’ business personal property coverage.

Many business/commercial policies also include coverage for Business Income loss, which is the economic loss or damage that a business incurs from a covered loss at the covered property. Also known as Business Interruption (BI), this would include coverage for extra expenses incurred by a business owner to continue operations while the insured premises are being repaired or replaced. Further, businesses forced to suspend operations or limit hours due to rioting, civil commotion or vandalism have coverage for the loss of income under the BI provisions of their policies. Note that BI coverage typically requires that a business incur “direct physical damage” to the premises before triggering coverage.

As the “devil is in the details” or as one insurance industry commentator has termed it: “RTFP - Read The Full Policy” what exactly is a “Riot” or “Civil Commotion?”

What is a riot?

A riot is defined by Black’s Law Dictionary, the most widely used law dictionary in the United States, as:

1. An assemblage of three or more persons in a public place taking concerted action in a turbulent and disorderly manner for a common purpose (regardless of the lawfulness of that purpose).
2. An unlawful disturbance of the peace by an assemblage of usually three or more persons acting with a common purpose in a violent or tumultuous manner that threatens or terrorizes the public or an institution.

What is civil commotion?

A civil commotion is defined as “a public uprising by a large number of people who, acting together, cause harm to people or property." Black’s Law Dictionary. To read more about defining these terms visit Merlin Law Group’s recent blog.

Thus, it is clear the damage to businesses we have all witnessed as a result of the riots or civil commotion, however you term it, is most likely covered by the insureds’ business owners policies. That is at least some solace to business owners who have already been racked by income losses stemming from the COVID-19 pandemic.

What’s next?  Ideally not another calamity, whether forecasted as we also are in the beginning of the hurricane season, or unforeseen as were COVID-19 and the rioting. Hopefully, the future is more about financial recovery and rebuilding from the sustained losses as well as the prompt discovery of effective treatments for COVID-19 and injustice.  The team at Sill is here to help in any way we can from reviewing policy coverage to filing and managing any property insurance claims that may be a result of these calamities. Contact our team today to take the next steps in the claims process.

Coronavirus Triggers Business Interruption Coverage

Nearly every business enterprise in America and around the world has been impacted financially as a result of the coronavirus. Many of those businesses have property insurance that include some type of business interruption insurance coverage for which they have been dutifully paying premiums, oftentimes for years, without submitting a claim.

Nearly every business enterprise in America and around the world has been impacted financially as a result of the coronavirus. Many of those businesses have property insurance that include some type of business interruption insurance coverage for which they have been dutifully paying premiums, oftentimes for years, without submitting a claim.

With the current pandemic, many will now seek reimbursement for their economic losses. I anticipate that few insurance companies will voluntarily acknowledge that the language in their policies providing business interruption coverage applies to the current coronavirus, forcing insureds to seek redress through legal avenues. The biggest question now is...

Does COVID-19 (or coronavirus) constitute “direct physical loss or damage” required to trigger business interruption coverage?

I believe the proper answer to be “YES, it does”. And in the absence of a specific exclusion should result in the recovery of the economic loss or damage incurred by commercial policyholders. Below are several of the areas that will help insureds justify their business interruption claim that results from the COVID-19 pandemic.

Policy Language

The first area we will look at is policy language and the rules concerning interpretation of policy language for what is and should be covered. There are 3 specific types of triggering language that will enact your policy coverage which are:

1. Plain language
2. Ambiguous language
3. Exclusion language

Physical Damage & Loss

This leads us to our second area which is the physical damage component of your coverage. The triggering language or coverage in most policies is the occurrence of “direct physical loss or damage” to the covered property. Once that is established to the covered property, the time element coverages of business interruption and extra expense are then triggered by any “loss resulting from necessary interruption of business conducted by Insured, whether total or partial, and caused by physical loss or damage covered herein during the term as to real and personal property”.

Generally, most claims are based on traditional physical "damage" to a property which are the result of common perils such as fire, tornado, wind and others. Policies refer not only to “damage”, but also to “loss”. If the two terms were meant to be duplicative or interchangeable, then there would be no need to have both set forth in a policy. Thus, the terms must necessarily have different intentions and meanings. 

Legal Cases

We see with government orders that required the closure, in total or in part, of non-essential businesses to protect against the spreading of the pandemic caused a “physical loss” of use of their properties, with resulting business interruption loss as provided for in “all risk” policies. There are several court cases that support this approach and make the corelation to the cornoavirus as a trigger for business interruption coverage justification. One of those cases being TRAVCO Insurance Co v Ward.

These are just some of the areas of coverage and allowance that insured businesses should be looking at as they navigate the unique and challenging economic realities of the current pandemic. For a more detailed reasoning of the arguments for coverage triggered by the coronavirus pandemic, we have published an eBook entitled Coronavirus Triggering Business Interruption Coverage that you can download below. For more information on other considerations and perspectives on business coverages during the COVID-19 pandemic, visit our blog or for a free policy review, click on the contact us button below.  

      

Business Interruption Interview with IREM

The Institute of Real Estate Management recently interviewed Sill's Michael Perlmuter to gather business interruption insights for the real estate industry and their membership as well as how it may apply to interruption caused by the coronavirus.

The Institute of Real Estate Management (IREM) recently interviewed Sill's Michael Perlmuter to gather business interruption insights for the real estate industry and their membership as well as how it may apply to interruption caused by the coronavirus. During the interview, Perlmuter covered topics such as:

• What is Business Interruption?
• What type of insurance or provisions in a commercial policy would cover business interruption?
• How does business interruption apply to the real estate market?
• What types of recovery might be present for property owners?

To listen to the full interview, visit the IREM site and watch the From the Front Lines: Business Interruption Insurance video. For more information and a review of your policy to see if you have business interruption coverage that may allow for a recovery due to losses resulting from COVID-19, contact our team today. 

     

What Documentation Is Needed for COVID-19 Business Interruption Claims?

My email inbox fills up too quickly each day with inquiries from clients and former clients concerning whether they have Business Interruption coverage for the economic losses that they are currently incurring as a result of the COVID-19 pandemic.

My email inbox fills up too quickly each day with inquiries from clients and former clients concerning whether they have Business Interruption coverage for the economic losses that they are currently incurring as a result of the COVID-19 pandemic.

That is NOT a simple “yes” or “no” answer.

To begin with, insurance is a “grey” area and difficult coverage issues like this even stray further from “black and white” answers. Whether a business will have Business Interruption coverage for their economic losses as a result of the coronavirus will depend on:

• The language of their policy
• The endorsements and/or exclusions in their policy
• The specific facts of the claim

Nevertheless, we are encouraging all of our clients which are incurring economic losses and which also have Business Interruption coverage with no so-called “Virus Exclusion” in their policies to make very general claims based upon the Business Interruption (or Civil Authority or Contingent Business Interruption) coverage, as the case(s) may be. Then sit back and see what response they get from their carrier. We together can react better once we know their carrier’s position.

That said, clients are also asking us what documentation they need to do and when to support their claim for economic loss under their Business Interruption coverage. Simply answered: Begin the documentation process NOW! Keep track of the exact date that you decreased and/or suspended operations and why there was a change such as governmental order, existence of coronavirus in your plant or contraction of coronavirus by an employee or employees.

Then, using your forecasted revenues and expenses as a baseline, track and record the following:

1. Track any and all changes in company policy.
2. Keep all correspondence with customers/tenants reflecting any reduction in their income/rents, etc., as a result of the virus.
3. Keep records of any and all extra expenses especially additional costs incurred in excess of normal operating expenses that a business incurs to continue operations.

All of this information will be absolutely necessary to support your claim for economic loss once we leap the coverage hurdle for your COVID-19 business income claim.

Sill is among the leading public insurance claims adjusters in North America. The company has nine decades of experience helping commercial policyholders both understand their specific coverage and then obtain the maximum amount due for their loss. The Business Interruption team at Sill focuses entirely on the special situations which result in business interruption claims. Our team is here to help you understand your coverage and maximize your claim recovery. Contact our team today or for more information regarding your coverage and for a free policy review for coverage due to losses resulting from COVID-19.

If you are looking for additional information on COVID-19 and coverage here are two other blogs we recommend. The first blog covers the application of commercial property insurance to COVID-19 claims and the second blog covers current legislation changes in some states.

Coronavirus Impact Potentially Leading to New Insurance Legislation

Following in the footsteps of New Jersey, the states of Ohio and Massachusetts have filed proposed legislation that could result in small businesses qualifying for business interruption coverage from their insurance policies.

Following in the footsteps of New Jersey, the states of Ohio and Massachusetts have filed proposed legislation that could result in small businesses qualifying for business interruption coverage from their insurance policies. The New Jersey Legislation, which has faced strong opposition from the insurance lobby, was focused on compelling insurance companies to cover claims by small business owners for damages resulting from COVID-19 up to the limits of their policies. 

Today, Ohio and Massachusetts have filed very similar bills with their respective legislation. The Ohio legislation (HB 589) is focused on protecting small businesses located in Ohio, which had business interruption insurance in their current policies. It compels insurance companies to cover claims by small business owners for damages resulting from COVID-19 up to the limits of their policies. 

The proposed legislation requires that COVID-19 be considered a “covered peril” and removes the exemption of virus which can be found in many commercial property insurance policies. 

As we stated in our previous post many commercial policies require that there be a "direct physical loss or damage" by a Covered Cause of Loss at the insured premises to trigger coverage. In addition, many commercial policies have an exclusion for loss caused by virus, bacteria, etc. In response, the legislatures of Ohio and Massachusetts are proposing legislation that would "require insurers offering business interruption insurance to cover losses attributable to viruses and pandemics and to declare an emergency." The legislation would apply to businesses in Ohio with 100 or fewer employees.

Many business owners have been hearing that the financial losses they incur during this pandemic are not being covered by their BI insurance. This new legislation could allow COVID-19 to be the trigger for Business Interruption coverage under their policy.

As this continues to flow through legal channels, we will share insights and changes as they become available. If you are interested in reading more on the topic here is a good resource covering the Ohio bill. If you have questions about your own financial losses and whether your commercial Business Interruption coverage would afford you protection, please reach out to the claim solution experts at Sill Company. 

Our team is here to help you understand your coverage, the changing regulations and maximize your claim recovery. Contact our team today for more information regarding your coverage. 

Businesses Possibly Covered for COVID-19 Losses

Businesses are being significantly impacted by COVID-19 and Michael Perlmuter, CEO & General Counsel, from Sill shares some information for businesses to consider as they are

Businesses are being significantly impacted by COVID-19 and Michael Perlmuter, CEO & General Counsel, from Sill shares some information for businesses to consider as they are impacted. The business losses resulting from the COVID-19 pandemic may be covered by commercial property insurance and owners/managers should critically review policy clauses to determine the extent business interruption is an insured event under their individual policy.

Furthermore, the New York Department of Financial Services in anticipation of the prospective financial implications caused by coronavirus disruptions, has ordered property and casualty insurers to timely and equitably explain the benefits and protection coverages related to COVID-19 to its policyholders.

Business interruption and determination as to whether a company can successfully file a claim is certainly teed-up in the line of important issues which will bubble to the top in coming weeks. Several possibilities exist for companies to benefit from some form of coverage. In the broadest sense, recovery may be limited by the requirement that in order to successfully make a claim for business loss, there first must be a direct physical loss to an insured property.

Property insurance typically covers a physical loss or damage to property. Although many businesses may not look at losses due to Coronavirus as a “physical” loss, the mere presence of the virus may constitute an insured loss, thus triggering coverage under the policy. In fact, many courts across the United States have recognized that contamination of property by a virus may establish the damage element of an insurance claim. As airspace within a building has been long recognized as real property, the presence of Coronavirus inside of a building, ship, or other structure would constitute damage to property. Some commercial property policies with business interruption coverage contain exclusions for property damage arising from pathogens, bacteria, viruses and other disease-causing agents.

Business interruption coverage is intended to compensate an insured for the income lost during the period of restoration or the time necessary to repair or restore the physical damage to the covered property. Associated coverage, known as Extra Expense coverage is intended to reimburse an insured for additional costs in excess of normal operating expenses that a business incurs to continue operations while its property is being repaired or replaced after having been damaged by a covered cause of loss.

Businesses also should be aware of potential Contingent Business Interruption (CBI) coverage in their policies. CBI may be present in some commercial property policies, and if included provides protection against revenue related losses. CBI typically covers lost earnings that are the result of a third-party supplier or distributor shutdown whose interruption in turn directly impacts the insured’s ability to produce a product or provide a service.

Most businesses are not as well versed on CBI. Many companies may lose earnings because they incur additional costs and/or are unable to conduct business with companies directly impacted by the Coronavirus outbreak. Businesses should carefully review the provisions contained in their policy’s CBI provisions.

Finally, my advice to business policyholders who have cancelled planned events to have policies reviewed by experts for first part Event Cancellation coverage. But like all of the claims issues involving coronavirus, coverage analyses are not simple nor will they be easily accepted by the insurers.

Consider how policies will be scrutinized upon the cancellation of events, such as those by MLB, NBA, NHL, NCAA, MLS, NASCAR, the PGA and many other sports organizations. Policyholders with Event Cancellation Insurance will be scouring the language to determine what is recoverable, while the insurers will be attempting to minimize their own losses. Insurance companies will be arguing in favor of exclusions or limitations. Meanwhile, the insureds need to be equipped for the battle armed with fortitude and perseverance to staunchly maintain the limitations and exclusions do not apply as broadly as the insurers contend. 

Sill is among the leading public insurance claims adjusters in North America. The company has nine decades of experience helping commercial policyholders both understand their specific coverage and then obtain the maximum amount due for their loss. The Business Interruption team at Sill focuses entirely on the special situations which result in business interruption claims. Our team is here to help you understand your coverage and maximize your claim recovery. Contact our team today or for more information regarding your coverage. Here are two article with additional information as well. The first article covers the application of commercial property insurance to COVID-19 claims and the other article covers areas of coverage that are up for case by case interpretation.

Analyzing the Notre Dame Cathedral Disaster

Analyzing the Notre Dame Cathedral Disaster From an Insurance Loss Perspective

By: Michael Perlmuter, J.D.  (Chief Executive Officer and General Counsel)
Alex N. Sill Company, LLC
North America’s Leading Public Adjuster and Loss Consultant

“Feu dans la charpente de Notre Dame” by LeLaisserPasserA38 is licensed under CC BY-SA 4.0

I watched along with millions of people around the world in disbelief and sadness as flames engulfed Paris’ majestic Notre Dame Cathedral.

I watched along with millions of people around the world in disbelief and sadness as flames engulfed Paris’ majesticNotre Dame Cathedral.The iconic international treasure has served as a place of Catholic worship for more than eight centuries and hosts nearly 13 million visitors of all ethnicities and religions each year.

 

Notre Dame (“Our Lady”) is more than just a tangible symbol of national pride for the citizens of France and a place to worship. The Gothic structure, its architecture and archives, have been home to historical treasures including documents, art and religious relics.

Thankfully, the devastating fire was ultimately controlled with no reported loss of life.  As such, total disaster was averted.

With the flames now extinguished, attention has quickly turned to recovering from the loss which could prospectively be $1 billion or more and restoring this great monument to its former glory.

Why are we weighing in here?

To put a twist on the catchy slogan from Farmers Insurance, we know a thing or two about fires and specifically iconic structures of worship because we’ve seen a thing or two. We know what the stewards of the cathedral face in rebuilding, the concerns they have about how to replace the irreplaceable, what it will likely cost to rebuild and how long it will likely take. Of course, many of these concerns are similar to our clients’ concerns who have suffered similarly devastating, albeit less internationally consequential losses.

So, if you could suspend your disbelief here, I would like to walk you through what the claims process would look like if Notre Dame Cathedral was our client (they’re not; while we work with clients across the United States, we don’t adjust losses in France) and if the building was insured for such a loss (it was not directly insured)**.

The First 48 Hours Are Crucial

Once a fire is brought under control and the last flames are extinguished, we would encourage the stewards of this building (the insured) to take the following actions:

• Review and understand your insurance coverages, extensions, limitations, and exclusions;
• Determine mutually setting the scope of the damage with your insurance company adjuster;
• Document, in detail, the damage to both the structure and any contents, be it furniture, fixtures, equipment, or fine arts; and
• Initiate the negotiation process with the insurer, including, importantly, agreeing on a minimum loss threshold in order to recover a preliminary advance payment to assist in the beginning of the process of re-building, are critical to ensuring a final fair settlement under the terms of the insured’s policy.

Preparation and Presentation of the Claim

Now that we’ve walked you through the initial steps, it is important to point out that all insureds, in this case the Cathedral, must be made aware the burden of proof is on them to prove their damages.

For context on this point, understand the anatomy of an insurance claim: the insurance company will retain (and pay) two separate experts to assess the damage to your building and to your contents and then will furnish those damage estimates to a carrier-employed adjuster to make you an offer of settlement. Clearly, it is not in the financial interest of the insurance company to “overpay” any given claim.

Once that offer is made to an insured, it is incumbent upon an insured to provide countervailing experts’ reports of damages that are larger in scope and in damages in order to rebut the carriers’ reports. Without that countervailing evidence, the Cathedral would be unable to overcome the damage assessment (and burden of proof) set forth by the insurance company and therefore, unable to move the settlement offer higher.

That is precisely where the experience and skill of a reputable public claims adjuster and loss consultant comes into play. In our case, our team of former insurance company adjusters, building appraisers and contents estimators, would prepare and present the Cathedral’s claim to the insurance carrier for negotiation and advocate on their behalf.

Advice for Building Owners

The likelihood of a similar disaster whether caused by fire, wind damage, hurricane, tornado, water damage or other covered natural disaster may seem remote to most property owners (as I’m certain it did for the Catholic Diocese of Paris regarding Notre Dame). However, that should not stop you from putting a plan in place for an unlikely catastrophic occurrence.

Here’s what you can do to prepare.

1. Annually review your insurance policy coverages with your agent or broker, ensuring that insured values for your structure reflect the current re-build cost and that your contents coverage (business personal property) has been updated to reflect any new machinery, furniture, fixtures, and equipment (FF &E) you might have acquired since the previous policy was written. In addition, make sure you understand the extensions to coverage that you may have to include business losses or cyber losses incurred, etc., as well as any limitations to coverage, such as co-insurance provisions and deductibles, or exclusions to coverage;
2. It is recommended you keep an up to date inventory of machinery, FF & E, and other business personal property with serial numbers and photographs so working together we can more easily re-construct your inventory that has been damaged;
3. Be prepared to retain a restoration contractor of your own choice, not your insurance company’s choice to do immediate remediation of the property as it is your obligation as a policyholder to mitigate your damages; and
4. Pre-interview a public adjuster, such as the Sill Company which has significant nationwide experience in assisting businesses like yours in adjusting insurance loss claims to their property

And of course, if you find yourself facing a similar loss, the Sill Company is just a phone call away.

** [Author’s note: As you’ve been reading the news stories about the Notre Dame, you may have been surprised to read the Cathedral wasn’t insured as it is owned by the French state, which essentially self-insures the Cathedral and most of its contents (some artifacts were insured by a third party insurance company). However, you also may have learned there were two contracting firms involved in the renovation and restoration of the cathedral and it is quite possible the blaze may have been started/caused by those workmen. As such, the fire is still under what is known as a “cause and origin” (C & O) investigation. It has been further reported that AXA, a very large French-based international insurance company provides liability insurance for both contractors. In the event the C & O investigation concludes that one or both of the contractors did cause the blaze, we can all be on the lookout for what is known as a subrogation claim by France against the causing contractor(s)’ insurance carrier, “subrogation” meaning the substitution of one person or group by another in respect of a debt or insurance claim, accompanied by the transfer of any associated rights and duties.]