After a video surfaced showing a Minnesota police officer kneeling on George Floyd’s neck, many residents took to the streets. While most engaged in peaceful protest, many resorted to violence. The result was extensive property damage to local businesses. The question is, will insurance pay for repairs and lost of income due to a riot?
Fortunately for them, all of the Insurance Services Office’s “causes of loss” forms for commercial property insurance cover losses caused directly or indirectly by riot and civil commotion, including looting that occurs at the time and place of a riot or civil commotion. The forms do not define the terms “riot” and “civil commotion,” but state laws and court decisions have provided definitions. Courts have held that a “riot” includes:
- Three or more people
- A common purpose
- An actual beginning or carrying out of the purpose
- An attempt by the participants to help each other or to cooperate by force
- A display of force or violence that would frighten a reasonably courageous person.
The courts have described “civil commotion” as a revolt (short of war or armed insurrection) involving a large group of wildly behaving people that causes “a serious and prolonged disturbance” and a breaking of civil order.
The events in Minneapolis appear to fall within either of these definitions. Large groups of people in an uncontrollable rage disturbed the peace for several hours at a time and over the course of several days. They cooperated to cause violence and destruction that any reasonable person would find disturbing.
Consequently, those businesses that carried insurance on their buildings, personal property and income streams may have coverage, depending on the terms of their policies. Business income insurance will cover profits lost because a business had to shut down due to damage to its property from the event. However, coverage begins 72 hours after the damage occurs.
The ISO Business Income (and Extra Expense) Coverage Form also includes a special coverage called Civil Authority. It pays for the business’s lost profits and extra expenses necessary to avoid shutting down if:
- A civil authority closes off access to the business’s premises
- Access is prohibited because of damage to a property other than the business’s property, and
- A covered cause of loss is responsible for the damage.
Coverage applies for up to three consecutive weeks after the authorities take the action.
To illustrate, a dozen buildings in Minneapolis burned in the riots. If police and firefighters closed off access to areas where some of these buildings were located, access to nearby undamaged buildings was prohibited as well. This insurance would replace lost profits and extra expenses for the businesses occupying those undamaged buildings.
The events in Minneapolis were a tragedy for George Floyd, innocent citizens and businesses affected. With the help of their insurance companies and having coverage in place, they will be able to rebuild and restart their operations and their lives.
