2020 has been a year of civil unrest: riots, looting, vandalism, and other civil commotion. As looters brought chaos to New York City early this summer, proprietors asked themselves, how insurance protects businesses from looters.
Thieves plagued pharmacies, banks, and big and small businesses. Fires, vandalism, robberies, and violence threatened their infrastructure and operations.
Insurance Does Cover Businesses from Looters
Standard business owner's insurance policies (BOPs) generally cover damage resulting from such altercations. Good business owner policies combine property, liability, and business interruption coverages:
... riots, civil commotion, vandalism, looting and fire in the U.S. are covered perils under virtually all business owners and commercial insurance property policies. Merchandise stolen by looters will also be covered.
Insurance Information Institute
In fact, policies include specific language related to looting connected to a civil commotion or riot. Policies may explicitly include (or exclude) civil commotion in their coverage. So, it's important to ask an insurance broker about each policy's specifications.
BOPs not only protect from damage caused by looters and rioters. In addition, they cover damage caused by civil authorities. For example, firemen and police responding to disturbances can also damage buildings and property.
Property coverage covers material losses from these terrifying events. This means damage to a locale's physical structure or the equipment, supplies, and other goods within.
Of course, coverage depends upon paid coverage. Unfortunately, many small businesses suffered financial difficulty during the COVID-19 quarantine. As a consequence, some New England businesses let their coverage lapse.
With their policies invalidated by non-payment, those affected by looters were not covered. According to the Insurance Information Institute, only about 40% of all U.S. small businesses have business interruption insurance.
Coverage from Policy to Policy
Not all business owner's policies cover the same risks. In fact, owners should carefully review policies and look for important gaps in their coverage.
For example, plate glass windows often stand out as prime targets for vandalism. However, as high-risk items, many policies do not cover them. So, business owners who want them covered may have to purchase separate policies for them. Many insurers charge additional premiums for criminal activity or inventory spoilage too.
In addition, not all businesses qualify for all of the types of coverage available in BOPs. For example, a policy for a restaurant does not cover auto insurance, workers’ compensation, or professional liability insurance.
So, when looking for such coverage, one should always look for the option to include different policies as part of a single package. This can reduce overall coverage costs compared to using unpackaged policies.
Business Interruption Insurance Protects Businesses from Looters
Business interruption insurance also plays an important role in covering threats from rioters or looters. Also known as business income insurance, it comes into play when rioting activity causes physical damage to the premises. As a result, businesses that must suspend operations or limit hours as a result of rioting damage may have coverage for the loss of income.
Insurance may include civil authority provisions for lost income or additional business expenses too. For example, when civil authorities prohibit business activities, policies provide limited coverage. Businesses can extend this coverage through additional premiums, though.
Auto Insurance May Also Cover Damage by Looters
The optional comprehensive portion of auto policies covers damage to cars during a riot. First, it reimburses policyholders for damage to the vehicle itself. This includes damage caused by fire, falling objects, vandalism, or a riot.
For example, it includes reimbursement for a cracked or shattered windshield. Regardless of the type of damage, it may or may not include a deductible, depending upon the policy.
In addition, it covers the contents of the auto. So, damaged and stolen items receive coverage.
Coverage Against Looters in New York
In New York, insurance protects businesses from looters. Ordinary BOPs protect against some riot-related damages. However, policy buyers should consult with an experienced insurance broker to ensure complete coverage.