Riots have devastated many businesses across the country during a historic summer of civil unrest. Small business owners, already reeling from the impact of the coronavirus pandemic, have felt the brunt of this destruction. They have, in turn, turned to their business insurance policies to cover their losses. What should the insurers prepare for, and will disputes over coverage result in litigation? If you’re an insurer and have questions about your exposure in the wake of the riots, turn to us. Rosenbaum & Taylor defends insurance companies when disagreements over policies wind up in the courtroom.
Issues for Insurers to Consider
As with the coronavirus pandemic, this summer’s spate of rioting has caused historic headaches for the insurance industry. Commercial policyholders and their insurers may have disagreements on what their policies cover. Some issues that insurers have to be careful about include:
Does the policy cover riot damage?
Virtually all commercial policies do, but what all is included? Policies often cover damage to the building plus destruction or theft of what’s inside.
Does the policy provide for replacement value or actual value coverage?
Replacement value is the cost to replace the item stolen or damaged. Actual value, on the other hand, takes depreciation into account. Replacement value is more costly for the insurer, so it’s critical to understand what the policy requires.
Does the policy cover loss of income?
Curfews, emergencies, and closures caused by riots may force a business to suspend operations, at least temporarily. The policy may cover this, but a question could arise as to when exactly it is triggered. Typically, direct physical damage to the business premises will activate this clause.
What about business interruption coverage?
Similar clauses pay for losses caused by interruption to the business. It’s not always clear when this coverage ceases. For example, it may end once the local civil authority lifts an emergency curfew. But the policyholder could demand that the coverage be extended beyond that time.
What will be required to support a business income loss?
A business owner must substantiate its request for an insurance payout to cover lost business income. Documentation such as profit and loss statements, payroll records, and sales records may be needed. The insurer should understand what the policyholder must produce and make sure it’s upholding its end of the policy.
Are demolition costs covered?
This is becoming a tricky issue, because demolition costs are higher than expected in many riot zones. The policy could have a debris removal limit much lower than the actual cost to bulldoze and clear rubble. This will likely cause significant resistance from the business owner looking to rebuild.
Will Lawsuits be Filed?
It’s too early to tell if there will be a wave of lawsuits like those triggered by the coronavirus pandemic. However, attorneys are starting to talk to individuals who have been hurt by riots. For example, demolition costs are in the hundreds of thousands versus much lower debris removal limits. That means businesses and homeowners, unable to cover the cost of demolition, are turning on their insurers. Attorneys representing these individuals will be looking for ways to force insurers to pay out higher amounts.
Of course, this is nothing new for those in the industry. But with rioting at unprecedented levels, it remains to be seen how potential lawsuits might pan out. It’s a good idea to speak with an experienced insurance defense law firm to understand the outlook.
When Times are Uncertain, You Can Count on Rosenbaum & Taylor
You may have questions about how the riots will affect insurance coverage. Or perhaps your company is already being sued by a disgruntled policyholder. The dedicated and skilled attorneys of Rosenbaum & Taylor are here to help. Give us a call today to schedule a consultation.