80-days ago, Governor DeWine issued the Stay At Home Order in Ohio closing all non-essential businesses. While the order was recently transitioned to a Stay Safe Order and allowed many non-essential businesses to reopen, many have chosen to remain closed until the health risks for their customers and employees are reduced or better understood. Thus, we all know the economy has not truly reopened and we are not moving about our normal way of life.
As we navigate this new normal, our lives, and more specifically, our insurance lives have not stopped. Our clients continue to experience adverse events, weather claims, property damage, car crashes, and cyberattacks. The Coronavirus has slowed down claims in many areas, but it did not stop the damage caused by last night’s riots in downtown Columbus.
As the peaceful protest turned into a violent riot, many businesses suffered property damage from rioters, including the building that houses our very own OIA headquarters. Many of the independently owned restaurants that our members, volunteer leaders and OIA team frequents were also damaged. From an insurance perspective, this event has raised some really intriguing coverage questions, like:
- Are riots and civil commotion a covered cause of loss?
- If a business was damaged in a riot but has was closed because of the COVID-19 Stay at Home order, is it a covered cause of loss or excluded because it is deemed a vacant property?
- If a business was damaged in a riot but has chosen to remain closed in spite of the Governor’s order that permits it to re-open, is it a covered cause of loss or excluded because the property is deemed vacant for over 60 days?
- What if the business was damaged in a riot, is still closed and the owner is temporarily staying in Florida and unaware of the damage caused to their property and fails secure it?
- What if the business owner shut off the electricity to save costs during the shutdown and did not maintain the proper protective safeguards to comply with the conditions of coverage?
These questions peaked our inner insurance coverage curiosity and had us referring to our Commercial Property CIC book to review the Insurance Services Office (ISO) coverage forms, causes of loss and exclusions. So, let’s get started with the analysis:
Are riots and civil commotion a covered cause of loss?
Under the Basic, Broad and Special ISO Commercial Property Coverage Forms, Riot and Civil Commotion Coverage is a covered cause of loss. It is often included in most homeowners, comprehensive auto and business insurance policies.
While you must review the specific policy language for each affected account (and consult with your underwriter as not to determine coverage as the agent), these are typically covered by Riot and Civil Commotion Coverage:
- Property damage to a home: both the structure and personal property.
- Vehicle Damage: provided the client has opted to carry comprehensive on their affected vehicle.
- Property damage to your business: both the structure and contents.
- Loss of Income: in the event the business must remain closed while the necessary repairs are made.
The Question of Vacancy For COVID-19 Closed Businesses?
Vacancy is a key question in this analysis. Chris Boggs, Big I National’s Coverage Expert, explored this issue in this article on COVID-19 and Commercial Property Vacancy Concerns. He pointed out that “ISO’s vacancy provision takes affect after 60 days of defined vacancy. For tenants, vacancy is defined as (a) When this policy is issued to a tenant, and with respect to that tenant’s interest in Covered Property, building means the unit or suite rented or leased to the tenant. Such building is vacant when it does not contain enough business personal property to conduct customary operations.”
Most of the tenant occupied businesses that we observed that were damaged by the riots were still considered occupied by the standard of containing enough business personal property to conduct customary operations regardless of whether they were open or closed.
If the building is deemed vacant, the policy completely excludes any loss caused by: vandalism, glass breakage, theft, or attempted theft.
All the losses suffered from the riots included these causes of loss. This is another reason why the consequences of the vacancy analysis is so critical for the insured.
Other Considerations with Riots and Coronavirus coverage
The insured has the responsibility to save and preserve property. If their property was damaged in the riot, they have to take reasonable means to save and preserve the property to prevent further damage. Being away for a week after the riot damage and failing to protect the property could trigger a concurrent causation exclusion.
The insured must maintain proper protective safeguards to comply with the conditions of coverage. In this situation they must maintain electricity in their unit, so the burglar and fire alarms are operational if required by the policy. Completing shutting down to save costs is not an option and could risk exclusion of coverage.
Finally, under the ISO form, if repair or replacement of damaged glass is delayed, coverage applies to temporary board-ups. Many businesses currently have boards on the windows and may continue to have such as the glass repair contractors respond to the many calls for help, they received after the riots.
In conclusion, this entire situation and analysis further heightens the need for businesses to consult with a professional insurance agent on the many unforeseen risks to their businesses that are completely outside of their control.
It is also further evidence of how important insurance is to the backbone of our economy. Preserving the insurance system will help businesses rebuild when damaged by riots and other unexpected events, reopen more quickly, and protect their investments in their businesses.