Insurance Question: Say Rioters Destroy My Business, Am I Covered?

A riot breaks out. Your business or home is vandalized and torched. Will your homeowners/commercial insurance policy offer coverage?  That was Alan’s question: 

“Mr. Beaver, my family owns and operates a small general store, carrying a wide variety of merchandise. Frankly, we are terrified of the civil unrest that has engulfed parts of America, with small businesses like ours destroyed by rioters.

“I asked our insurance broker if we would have coverage should such a terrible thing happen to us, and he answered, ‘Don’t even dream of making a claim. If it happens, the insurance company will tell you it is a rebellion, civil war, and they do not cover civil war.’

“I have read your column for years and walked away with a strong feeling that I can’t trust our broker to tell us the truth. Would we be covered if rioters destroyed our business? Thanks. Alan.”

Brokers and Agents are the Company’s First Line of Defense – Do Not Rely on Them

I ran Alan’s timely question by Los Angeles based attorneys Brian S. Kabateck and Shant Karnikian who specialize in insurance bad faith cases. Both have been longtime friends of this column, always ready to answer readers’ questions.

Kabateck: In general, unless specifically excluded, a business owner’s insurance policy will cover all physical damage to property and the contents inside even when the cause is riots, civil commotion or vandalism. Also, most business policies cover loss of income resulting from physical damage to the premises. 

However, we repeatedly find that policyholders have been led to believe there is no coverage for these types of losses, when in fact there generally is. This impression is created, we have learned time and time again, by some insurance companies through an active campaign of misinformation waged by their brokers and agents.

Consumers will usually turn to their broker or agent for assistance in making a claim and believe they have the policyholder’s best interests in mind. While many do, this cannot be assumed.

Karnikian: Most people are unaware that brokers’ and agents’ commissions are often tied to the amount of claims paid to policyholders. This means there is a financial interest in minimizing the number and size of claims made by their policyholders. 

As a result, they will often discourage their very own policyholders from making claims by mistakenly (or even deliberately) misrepresenting that the loss is not covered.

Brokers and agents are the insurance companies’ first line of defense against your ability to recover benefits you are owed under the policy. Anyone caught up in such a horrible situation needs to speak with their attorney instead of just accepting their agent’s advice to forget making a claim.

How to Prepare for an Insurance Claim if Rioters Damage Your Property

We have all heard the saying that an ounce of prevention is worth a pound of cure, and the same applies to a possible insurance claim resulting from civil disobedience.  Both attorneys strongly urge reading your insurance policy to understand what has been excluded.

Kabateck: Most policies do exclude such things as civil war, revolt, revolution, rebellion and insurrection, but our country has seen nothing approaching that.

Karnikian: You need to prepare for the possibility of a claim due to a protest getting out of hand. This starts with knowing what your policy covers and, as with any type of property loss, being able to submit a detailed audit of what you have lost.

Kabateck: Know what your policy provides before tragedy strikes. If you are in an area where it is feared a riot or looting could occur, be pro-active and meet with a business lawyer who has experience with insurance policy language and claims procedure. This is especially important in the complicated area of business interruption losses.

Take photographs and video your premises. Essentially, you want to have proof of what was lost ready before the event, and keep this information stored off premises or in the cloud.

If you become a victim, track all damage, expenses and lost income, because your insurance company will need detailed proof of loss early in a business interruption or property damage claim. It is also a good idea to set up a separate accounting code to facilitate documenting insured losses.

Karnikian: Hope to never need their services, but line up companies that can board up the property and perform remedial cleaning and repairs.