UPDATED: Sep 6, 2020
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- Commercial insurance almost always covers riot damage
- The COVID-19 pandemic will complicate business interruption claims
- Five insurance companies control 29 percent of the market
On May 25, George Floyd was killed. He was detained initially on charges of filing a fake check. When an officer killed him by placing his full weight on his knee pressed again Floyd’s neck, the country was outraged. Soon, what followed was the worst civil disturbance in America in 50 years.
While most protests were peaceful during the day, some protests turned into riots, resulting in small businesses taking a loss. This, in turn has led to an important discussion over commercial insurance and riot damage. In order to recover, small businesses must understand how commercial insurance applies to riots.
This article examines the insurance needed to recover from riot damage and looting. We will break down what’s covered under commercial insurance and how much the largest providers are paying toward these claims.
We’ll delve deep into riots and commercial insurance, commercial insurance laws, and how to file a claim. We’ll also touch on the coronavirus pandemic and how it may affect the payout from these claims. Our analysis covers commercial property insurance and commercial liability insurance as well.
To get a quick glimpse at commercial multiple peril insurance, which often incorporates property insurance and liability insurance, take a look at the graph at the top of the page. It shows the average amount of money spent on premiums per 1,000 people. The most expensive area of the country is the Northeast. In addition, some of the questions we answer are:
- Does business insurance cover riots?
- Does commercial insurance cover looting?
- Are riots covered by business insurance?
We’ll also give a riot insurance definition and analyze strike, riot, and civil commotion insurance. In the first section, we’ll cover the five largest companies (and one might argue, some of the best insurance companies) for commercial multiple peril and riot insurance.
Now is also the time to see whether you have the best rates for your commercial or business insurance. Begin shopping rates by entering your ZIP code into our free insurance comparison tool. Ready? Let’s go.
Top 5 Companies for Commercial and Riot Insurance
To start off our guide to commercial multiple peril insurance, let’s take a look at the five largest companies in that market. This is useful for business owners as a breakdown of each top five company, any of which you might want to go with if you’re starting out, or switch to if you’re unhappy with your current company.
The market that we looked at is called commercial multiple peril insurance. It is the most popular kind of business insurance because it allows business owners flexibility to choose which perils that they want insurance coverage for. If you want a quick guide and coverage of commercial multiple insurance itself, jump down to our commercial multiple peril insurance and riot damage section.
To analyze these top five companies in the commercial multiple peril insurance market, we are going to look at four statistics. Three are from the National Association of Insurance Commissioners (NAIC) and another is from a major financial rating company. The four are:
- Direct premiums written
- Market share
- Loss ratio
- AM Best rating
Some of these names you might recognize. Others, you might not. For a quick glimpse, we have the following graphs that show direct premiums written for the five largest companies, the companies’ loss ratios, their market shares, and their cumulative market share.
This graph shows those first two categories — direct premiums and loss ratios. The three companies at the top you are likely familiar with. The last two, possibly not. The loss ratios for each company are in relatively healthy places. Two of the companies – Travelers and Tokio Marine Holdings – have loss ratios that are a little bit low compared to insurance companies generally, but not extremely low as to signal a serious situation with fulfilling claims.
The next graph shows the market share for the largest five companies in the commercial multiple peril insurance market along with their cumulative market share. While each company’s market share is decent – between 4.7 percent and 8.3 percent – the market is more fragmented than some of the insurance markets.
For instance, the car insurance market has multiple companies with over a 10 percent share of the market. Still, the top five commercial multiple peril insurance companies account for nearly a third of the overall market. Now that we have that quick preview of the largest five companies in terms of direct premiums written, loss ratios, market share, and cumulative market share, let’s take you through each company one by one.
In these sections, we’ll cover individual statistics and compare them to other companies. Then we’ll touch on the all-important factor of financial strength ratings, which come from a major financial rating company in AM Best.
#5 – Tokio Marine Holdings Insurance
This list starts off with Tokio Marine Holdings. You might not be familiar with them if you’re not a business owner. This is a foreign insurance company based in Tokyo, Japan, Tokio Marine Holdings ranks 5th in the United States for direct premiums written and market share within commercial multiple peril insurance.
Here are the statistics:
|Direct Premiums Written||Market Share (%)||Loss Ratio||AM Best Rating|
Direct premiums written is a measure of a company’s customer base. The more direct premiums written, the larger the company. Market share falls in line with that. Tokio Marine Holdings is ranked 5th for both direct premiums written and total market share. What may be a little strange in these statistics is the loss ratio.
Loss ratio is a term used in insurance industries to describe a company’s profitability. It represents the number of claims that insurance companies are approving. Anything below 0.5 generally means a company might not be paying out on many claims. Anything above 1 generally means a company is losing money.
Tokio Marine Holdings is on the lower end of the spectrum with a loss ratio of 0.55, which suggests they aren’t paying out on as many claims as some other companies.
This is important to keep in mind if you’re a business owner seeking to file a commercial insurance claim following rioting or looting damage.
Then there is the AM Best rating. AM Best is a financial rating company. They rate companies all around the world for their financial strength, which is measured through solvency and stability, among other factors. Tokio Marine Holdings receives AM Best’s highest rating with an A++. According to AM Best ratings, this score means:
“Assigned to insurance companies that have, in our opinion, a superior ability to meet their ongoing insurance obligations.”
This could mean many things. Tokio Marine Holdings might have enough money to withstand a huge amount of its customers making claims at the same time. It could also mean that Tokio Marine Holdings can withstand economic downturns and other events that destabilize economies.
One option that could buffer Tokio Marine Holdings’ revenue is its travelers insurance. Tokio Marine Holdings’ travelers insurance might appeal to travelers during this new coronavirus age.
#4 – Chubb Limited Insurance
Like with our previous insurance company, the average person might not recognize our 4th largest commercial multiple peril insurance company. That is because the company, Chubb, is another foreign insurance company. In this case, the company is based out of Switzerland.
|Direct Premiums Written||Market Share||Loss Ratio||AM Best Rating|
Chubb has slightly more direct premiums written and a much larger market share than our previous company. It has the same AM Best rating. The difference comes with the loss ratio. Chubb’s loss ratio is a full 0.12 higher than our previous company. This means that Chubb is paying out on more claims. Again, if you’re a business looking to file a commercial insurance claim in the face of riot or looting damage, this is important to know.
#3 – Liberty Mutual Insurance
Our 3rd-largest company within business multiple peril insurance is one most are going to recognize. In addition to business multiple peril insurance, it is a big player in car insurance and homeowner insurance. Customers may also recognize it from its recent commercials starring Doug and an emu.
This company is Liberty Mutual.
|Direct Premiums Written||Market Share||Loss Ratio||AM Best Rating|
Its market share at 5.6 percent in the commercial multiple peril insurance market is also much higher than the previous two companies. Its loss ratio is between the two previous companies. At 0.59, it’s not particularly bad or good. It may be on the low end but is still much higher than Tokio Marine Holdings.
The main difference, however, between Liberty Mutual and the previous two insurance companies is its AM Best Rating. While the other two companies score an A++, the highest possible AM Best rating, Liberty Mutual scores just an A. How big of a drop is this? AM Best writes about its A rating:
“Assigned to insurance companies that have, in our opinion, an excellent ability to meet their ongoing insurance obligations.”
So, it’s not as good as an A++ but not that bad overall. If you want the complete take on Liberty Mutual, check out our Liberty Mutual review.
#2 – Nationwide Insurance
Our 2nd largest company within commercial multiple peril insurance is a well-known company in the United States as well. It is a major player in car insurance and homeowners insurance. It is often thought of during football season due to its commercials involving Peyton Manning and Brad Paisley. This company is Nationwide.
|Direct Premiums Written||Market Share||Loss Ratio||AM Best Rating|
You might be forgiven if you think you’re having deja vu. Nationwide’s statistics are remarkably in line with Liberty Mutual’s. In fact, Nationwide has just 290 more direct premiums written than Liberty Mutual. Its market share is roughly the same and its loss ratio is just .03 higher than Liberty Mutual’s.
The main difference between Nationwide and Liberty Mutual is that Nationwide has an A+ rating from AM Best. Liberty Mutual had just an A rating.
Under AM Best’s rating scale, an A+ rating is at the lower end of its top category. AM Best still rates Nationwide as having a “superior” ability to meet its ongoing insurance obligations. It’s just one step below the AM Best ratings for Chubb and Tokio Marine Holdings. And it is one rung higher than Liberty Mutual as well. For more information, take a look at our review of Nationwide Insurance.
#1 – Travelers Insurance
And we’ve made it to the largest company in commercial multiple peril insurance. It’s a familiar one as well, with its own set of U.S. commercials starring J.K. Simmons and a strong presence in the car and homeowners insurance markets. This company is Travelers.
|Direct Premiums Written||Market Share||Loss Ratio||AM Best Rating|
Unlike the previous two American insurance companies, which were very close together in terms of statistics, Travelers separates itself. It has 1.1 million more direct premiums written and 2.6 percent more market share than its nearest competitors. Its loss ratio is a little low, similar to Tokio Marine Holdings.
This low loss ratio may suggest that Travelers withholds a little more than other companies when it comes to claims. But its AM Best Rating is A++, the highest possible rating.
That makes it tied with Chubb and Tokio Marine Holdings. It beats Nationwide and Liberty Mutual in that category. Like with the other two American insurance companies, we have a Travelers Insurance review if you want to know more about the company and what they offer.
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Now, on to the big question in our guide, “are riot damage and looting covered by insurance?”. The answer from most insurers, fortunately for business owners, is “yes.” To dig deep into that question, we look at the most commonly purchased commercial insurance policy covered in brief in the last section — commercial multiple peril insurance.
Multiple peril is a type of commercial insurance that insures a business owner for a variety of issues. Business owners can choose which issues to be covered for when signing up for a policy.
Commercial multiple peril insurance often combines property and liability insurance for business owners. It creates a sense of flexibility. In some cases, a business can apply for general liability insurance or product liability.
They are covered if someone sustains an injury in their workplace or if someone damages one of their products. Other examples include policies for niche industries or unique situations. These include:
- Employee theft or forgery
- Barbershops and hair salons professional liability
- Pharmacists or druggists insurance
Now, where does strike, riot, and civil commotion insurance come in? As the Insurance Information Institute (III) writes:
“Business property that has been damaged by riot, civil commotion. vandalism and fire are covered under virtually all business owners and commercial insurance property policies.”
This includes damage to storefronts, including doors, light fixtures, windows, and plate glass. Also typically covered is property inside the business, including furniture, office supplies, computers, and machinery. That means business owners can file a claim to receive reimbursement for those physical parts of a company that have been damaged in riots or looting.
These claims are filed under commercial property insurance. The reimbursement value an owner will receive for a damaged property comes from one of two options that apply to both riots and commercial insurance and other types of commercial insurance.
The first option is actual cash value. This reimburses a business owner for the literal value of the property if it had not been damaged. This can hurt a business owner because it takes depreciation into account.
The second option is replacement value. In this case, the value of the piece of the damaged property is based on the market value of the same or a similar piece of property. While replacement value may cost more when paying for the insurance policy, it can lead to higher reimbursement.
In the video below, a lawyer from a national law firm explains the difference between actual cash value and replacement value.
This attorney shares that the difference between the two is important to understand, as a determination on a claim or the result paid out may be very different for each option.
There is another angle to riots and commercial insurance. Often, when a business is damaged during a riot, they have to close down at least temporarily. In this sense, they are not earning any money due to a situation outside of their own control.
The business would rely on business interruption insurance or business income insurance when they have to temporarily close due to damage in a riot.
This insurance covers businesses during events that damaged the business’s ability to operate. These include riots and civil authority shutdowns. It also includes weather damage, which can be helpful if, for instance, your business is in one of the worst states for tornadoes. Some common situations include when:
- A government agency requires your block or neighborhood to shut down all businesses
- A natural disaster occurs and requires you to shut down your business
- Strikes, riots, or civil commotions damage your building to the point where it has to get shut down
There are a few aspects to business interruption insurance. The first is that business interruption insurance would reimburse a business for lost revenue.
The insurance company would pay a business owner money based on the regular amount of revenue that would be earned for those shut-down days. Certain aspects of the business would be covered as well. These include:
- Mortgage, rent, or lease payments
- Loan payments
- Relocation costs
If your business is damaged in a riot and you have commercial multiple peril insurance with that coverage, your business (and your pocketbook) would be covered.
Virtually all business owner and commercial insurances cover strike, riot, and civil commotion damages. And if you have business interruption insurance, your lost revenue would be covered as well.
There is, however, a point that complicates this process, specifically the business interruption insurance. Because it is based on the revenue a business would typically generate, the insurance company uses a certain time frame and circumstantial factors to determine the size of the reimbursement.
And the one thing we know: The coronavirus pandemic has shuttered most businesses, complicating the situation for riots and commercial insurance.
Coronavirus and Riot Damage Commercial Insurance Claims
The coronavirus pandemic has changed a great deal about society for the past few months. It has led to the exposure of some of the worst states for COVID-19 fraud countless coronavirus frauds, which in turn has drained consumers of money. Misinformation from numerous sources has led to strife between the already polarized United States.
And with the traffic changes brought on by coronavirus, more and more people have been stuck at home, unable to go work in an office or visit their favorite restaurant. Various state mobility reports have shown this. To that end, it should be of little surprise to find that businesses all across America have been losing money, sometimes millions and millions of dollars.
The coronavirus has hit many industries hard, to the point where millions of jobs have been lost. It might not be a surprise, then, that certain businesses are trying every method to get some money back. It is for this reason that insurance companies and small businesses are fighting.
Why have they fought? According to multiple news and magazine outlets, the issue is simple. Small businesses want to be reimbursed for the revenue they have lost due to the coronavirus pandemic. Insurance companies don’t want to pay. The issue surrounding this battle is called business interruption insurance.
Essentially, business interruption insurance covers business owners when a situation outside of their control closes their business. The insurance companies then reimburse the business owner for revenue lost, rent payments, payroll, and other financial factors.
This includes the situation with riots and commercial insurance, or strike, riot, and civil commotion insurance. However, with the coronavirus, things become more complicated. Coronavirus claims for business interruption insurance are complex and hinge on one particular factor—that is, the clause stating that “physical damage” is a threshold for receiving a payout.
A business owner who has a tree fall on his business may receive a payout for business interruption insurance. But a business owner whose business has closed due to a virus might not.
This is true, even if the government has ordered the business to shut down. Due to this physical damage threshold, insurance companies around the world are withholding money from businesses.
In this video by Bloomberg, David Sampson, the CEO of the American Property Casualty Insurance Organization, explains the insurance industry’s rationale for not paying business interruption insurance claims.
Even business owners who think their business is covered due to a government order are only safe under specialized insurance called “civil authority insurance.” From the insurance companies’ perspectives, there is a simple reason for these denials: bankruptcy.
Insurance companies might go bankrupt if they fulfilled all the claims sent their way because the business revenue losses in general during the coronavirus are at least in the hundreds of millions. Instead, they are punting the football back to business owners. Even those business owners that receive business interruption insurance claims might only have them for a specific period of time.
Generally, there is an hours cap on business interruption insurance claims. This means that although a business has been closed for around two months, they might receive business interruption insurance payouts that cover two weeks of lost revenue. So, how does this impact riots?
Of course, the answer, due to COVID-19, is complicated. While each state and many municipalities are in the process of reopening, the shutdown orders for many small businesses may continue for a couple of weeks, or maybe longer.
An insurance company might tell a business owner that their business interruption insurance claim is not valid. This is because the business would still be closed due to a lockdown.
Because of that, a business interruption insurance claim is not valid because they would have been closed anyway. So, while the insurance company might pay out for property damages, they might not for business interruption insurance. This is even if there is legitimate, documented damage, as with riots and commercial insurance or strike, riot, and civil commotion insurance.
This puts further strain on small business owners who don’t receive business interruption insurance payout. What is interesting to note is that the courts across America do not have a unanimous agreement on this issue. Some have ruled that businesses in this situation are entitled to a payout.
Others have ruled the opposite. As noted in a Reuters article, President Trump has said insurance companies must pay out on business interruption claims for their clients. To some insurance companies who would pay out far more than they are taking in, this might be a disaster.
For small business owners, they may feel they have to cut down expenses significantly, including cutting payroll. Fortunately, the federal government created a service that allocates money through forgivable loans to small businesses that meet certain qualifications. This service is called the Paycheck Protection Program.
As of the end of June, the federal government has so far allocated over $517.3 billion in loans to small businesses across the country. California has received the largest loan award out of all states at $68.2 billion.
Commercial Insurance Laws Are Key During the 2020 Riots
While we’ve covered the gist of commercial multiple peril insurance, we felt that it might be helpful to add some definitions to that insurance. Also, check out this page of insurance terms. It might be helpful as we delve into these commercial insurance topics.
It’s important to note that commercial multiple peril insurance protects a business both from property losses (or income losses) and general liability. An insurance company will often break these perils down as commercial property insurance and general liability insurance.
In some jurisdictions, the term might be SMP or special multiple peril insurance. What are the general terms associated with this insurance? Here are five:
- Property insurance: Property insurance pays for losses and damages to real or personal property. An example of this is if a tree falls onto your building, damaging property.
- Glass insurance: Glass insurance pays for damage to windows, whether they are regular windows or plate glass windows. Rioters damage windows often in an attempt to break into stores and loot.
- Crime insurance: Crime insurance pays for property crimes such as stolen merchandise. It also includes various criminal acts such as forgery, embezzlement, and fraud.
- Liability insurance: Liability insurance protects your business and your pocketbook if you are sued for something that occurred on your business premises or other property (like a commercially insured car if someone driving it hurt someone).
- Boiler and machinery insurance: Boiler and machinery insurance is often called “mechanical breakdown insurance” as it refers to the breakdown of equipment. In this case, you might receive property and business interruption reimbursement.
And then there are the specific laws that govern commercial insurance. Just like with auto insurance, each state has its own commercial insurance laws. However, across the country, there are certain regulations that govern the rates and solvency of each insurance company.
The first important point to note is that the National Association of Insurance Commissioners (NAIC) is the organization that works to regulate rates.
The NAIC does this through numerous factors, which include prior approval and competitive rates. In prior approval, the insurance commissioner for each state or its department must approve rates prior to being issued. In competitive rate regulation, companies may compete with each other for the lowest (and most customer appealing) rates.
It applies to all types of insurance, including situations with riots and commercial insurance or strike, riot, and civil commotion insurance. The insurance commissioner sometimes might not require written approval from the insurance companies before they issue rates.
This is true even with some prior approval procedures like file and use or the competitive rate regulation method. Rates are still generally filed with the insurance department of each state, which can later review them as part of cursory oversight. In the end, each type of regulation is up to the insurance commissioner or insurance department in that state.
In the following video, an associate professor of risk management and insurance from the University of Georgia covers the regulation of the insurance market.
In all states, however, insurance companies must meet certain solvency requirements to still be viable as insurers in those states. These solvency requirements are based on capital surpluses.
An insurance company needs to have a certain surplus in order to provide policies to customers. The reason being that an insurance company needs to be able to pay out on claims if that were to arise.
Finally, while it may seem obvious, an insurance company needs to be licensed to write policies in the state where it is located. For new companies, that might mean seeking out a designation of a “domestic insurer,” which applies to insurance companies that were formed and practice insurance in the same state.
The other term is a “foreign insurer,” which occurs when an insurance company that is licensed as a domestic insurer in one state seeks to write policies in another state. It is important to note that these mechanisms are common and likely apply to most, if not all, types of insurance in the market.
For particular laws that govern your state, reach out to the NAIC or your state’s insurance department.
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Let’s say you own a business. During the riots in your city, individuals broke your windows, entered your store, and looted materials. You’re frustrated. The rioters may have cost your store thousands of dollars. You don’t know what to do. In this situation, you’re likely to file a commercial insurance claim.
But what is this claim, and how do you file it? In this section, we cover five major steps on the way to filing your commercial insurance claim and getting reimbursed for damages.
This applies to the situation of riots and commercial insurance as well as strike, riot, and civil commotion insurance. If you know the steps to submit car insurance claims, you’ll find these two lists similar.
#1 – Assess and Document the Damage After a Riot
One of the first steps you’ll do when filing a commercial insurance claim in the midst of riot damage is to assess and document the damage. This means that you’ll go through your store, one section at a time, and note all the things that are damaged, broken, or stolen. In this situation, you’ll document the damage.
You might do this through pictures taken from a camera or noting in a document what has been stolen compared to pre-riot conditions. When you do this, you’ll want to file a police report. Many insurance companies won’t pay out on a claim without the presence of an official document like a police report.
If you have a security camera in the store or outside of it, you can add that to the evidence collection as well. It’s important to document everything. It provides evidence for your commercial insurance claim, which will make it more likely that the insurance company will reimburse you for the damage or pay out on the claim with the highest possible reimbursement.
#2 – Review Your Insurance Policy for Riot Insurance Details
Before you file your claim, review your commercial insurance policy. When you do this, look for specific language that shows that the insurance company will cover you, even during difficult circumstances like damage from a riot. On top of this, read through your insurance policy to find out what they will cover.
You might have a multiple peril policy that covers glass damage but doesn’t cover damage to machinery. Knowing this will help you make your case to the insurance company.
Once you’ve done this, you are ready to put together specific language in your claim or talk with a claims specialist in your insurance company’s organization. But there are still additional steps you need to take before filing. Some of these are there for your protection and seem like the natural thing to do. However, they are crucial for an effective claim.
#3 – Move to Prevent as Much Damage as Possible Before Another Riot
Insurance companies will consider commercial insurance claims and often pay them out. However, there is a specific step business owners must take in situations involving riots and commercial insurance or strike, riot, and civil commotion insurance. This step is to move to prevent future damage.
What does this mean according to insurance policies and companies when it comes to riots or civil commotions? An example is one of the commonplace issues in a riot: the breaking of glass. If the business owner has commercial glass coverage, the insurance company would need to pay out on a glass coverage claim.
However, the insurance company wants to see more than that. For those reasons, it’s important for a business owner to take the necessary steps to reduce further damage to the windows or glass parts of the business. One of those steps is to place wooden boards over the windows to prevent future damage.
Insurers like to see that a business owner is doing all they can to prevent damage from more riots.
Some of these steps include padlocking the store, covering exposed areas, removing debris, and separating damaged merchandise from undamaged merchandise. Doing these steps causes another effect. It reduces the likelihood of a business owner filing a second claim.
In the video below, a news station in Los Angeles discusses the issue of commercial insurance claims and riots, which are sometimes referred to as “acts of God” in insurance policies.
The news reporters explain that while insurance companies may reimburse for damage, it is possible the consumers will feel the effects. This, because each business’s premiums might rise.
Unfortunately, the more claims a business owner files, the less likely they have a chance of getting all fulfilled. Insurance companies also look at businesses with more claims as having more risk. In this situation, they are likely to charge higher premiums.
#4 – File Your Riot Insurance or Business Multiple Peril Claim
This may be the easiest part of the claims process for business owners. You, as a policyholder, are required to notify your insurance provider at the earliest possible moment that you know you’ll file a claim. There are a few options a policyholder generally has to file one.
Talking to an agent: Often, an agent can walk you through the process of filing a claim. While there may be many steps to the process, frequently they are simple and can range from sharing about the damage to the avenues for submitting documentation.
File a claim over the phone: Many commercial insurance companies have lines set up where a business owner can call and file a claim. The claims specialist for a company may ask you a series of questions about what happened and what damage occurred. They may fill you in on the next steps, including submitting evidence of the damages or submitting a police report.
Using an online claims filing system: Depending on the size of your company, some commercial insurance companies offer an online system for you to submit your claim. In this case, you can submit photos or any evidence you have of the damage or that will support your claim.
A note, however: Some insurance companies only offer this for large companies. Talk with your provider for more information.
Information needed to file a claim includes your policy number and name, the damage caused, any evidence you have, and attempts to minimize future damages.
Lastly, the information required for business interruption insurance will be different from a liability or general loss claim.
#5 – Wait for the Reimbursement from Riot Damage or File an Appeal
After you submit your claim, the last thing to do is wait for the reimbursement or file an email. In some states, insurance companies are required to notify you that they have received your claim within 15 business days. As FreshBooks explains, some companies will try to get out a claim verdict within 40 days.
During this process, an insurance company might send out a claims adjuster to inspect the damage. This often occurs in situations involving riots and commercial insurance. In this situation, you’ll want to have any documentation handy to speed up the process.
Some companies allow their claims adjusters to approve the claim on the spot, which can save you time. If your insurance company has denied your claim, you generally can appeal it. To do this, you can speak with the insurance company’s customer service team or talk with a customer advocate team within the insurance company.
These customer advocate groups are likely to be more objective than a regular claims processing team and may handle the case in a way that advocates for you personally.
Because of the coronavirus pandemic, many claims cases are likely to be more complex than typical, which may delay processing times. This is especially true of business interruption insurance, which reimburses you for lost revenue, rent payments, and other financial obligations.
Again, an insurance company perceives the filing of multiple claims negatively. If you do so, you may have some or all of the claims approved. However, it is possible the insurance company will raise your premium. All of these steps apply to different types of commercial insurance.
This includes strike, riot, and civil commotion insurance, which protects your business and your pocketbook during times of civil unrest.
Commercial Insurance and Riot Damage Analysis from the Experts
We’ve covered the high points about riot damage and commercial insurance. Here are three experts that provide additional analysis about the riots, commercial insurance, and how the property and casualty insurance industry might react to small businesses filing business insurance claims during these events. Riots and Looting Claims Property insurance provides coverage for damage to buildings and personal property as well as loss of income as a result of rioting and looting. Property policies are typically written in one of three forms.
- Basic form: covers insured property from damage to specified perils
- Broad form: covers insured property from damage to basic form perils and additional specified perils
- Special form: also known as ‘all risk,’ covers insured property from damage to all perils unless specifically excluded by the policy
Riot, civil commotion, and vandalism (but not theft) are covered under the basic and broad-form policies. Special form typically covers riot, civil commotion, vandalism, and theft if requested.
Most insureds should be able to recover at least in part from their property insurance carriers regardless of the property form they carry assuming the property limits are adequate.
However, if a building was vacant, an insured may have their property claim denied. Many policies include vacancy provisions that do not provide coverage for theft or vandalism if a building is vacant as defined by the policy. Vacancy is defined by the percentage of the building that is occupied and varies by policy.
Typically, if a building is under 15-20 percent occupied a carrier will deem the property vacant. In such cases, it is conceivable an insurance carrier will deny coverage for damage to a vacant building caused by the riots or looting. I do not envision the riots or looting having a significant impact on the property and casualty insurance industry. Carriers are well capitalized to handle these claims.
COVID-19 Business Income Claims
Property insurance policies typically include or at least offer the option of loss of income/business interruption coverage. In many cases, this limit is based on the full or percentage of the insured’s reported annualized income.
For many small business owner policies, the limit is the ‘actual loss sustained’ over the course of 12 months rather than a numerical limit. Business income typically includes the net income of the business plus any fixed expenses and payroll the business continues to incur despite lack of operation.
Most insurers, if not all, have taken the position that there is no coverage for business interruption caused by a virus and in most cases, their argument is very strong. In 2006 Insurance Services Office, Inc. (ISO) sought state approval for a property exclusion titled ‘Exclusion for Loss Due to Virus and Bacteria’ (form CP 01 40 07 06). ISO is a nonprofit with membership comprising over 1,000 property and casualty insurance companies.
ISO develops policy forms and files them with state insurance regulators for use by their members. Since 2006, most insurers have included the CP 01 40 07 06 form or a similar form in their property insurance policies. The form is typically prominently identified in property policies in large bold type.
In my opinion, it is very difficult to argue there is income loss coverage under a policy that includes this or a similar exclusionary form. However, there are a small number of carriers that do not include the CP 01 40 07 06 form or a similar form in their property insurance policies.
These carriers argue that loss of income/business interruption coverage requires a ‘direct physical loss of or damage to’ covered property before coverage is triggered.
A virus (including COVID-19) does not cause ‘direct physical loss of or damage to’ property. Keep in mind, the term ‘direct physical loss of or damage to’ is not defined by most insurance policies and is therefore subject to interpretation by the courts.
While courts will be guided by their own rules of contract interpretation and precedent, if any, there is a compelling argument that loss of income for COVID-19 related claims is covered under these policies. The results of the pending COVID-19 business interruption litigation are likely important not only for many business owners but also for insurance carriers.
It is doubtful insurance carriers are capitalized to account for a major income loss occurring at every insured business on their books. In many cases, a single month of business income loss is feasibly in excess of the annualized premium paid by that insured. The stakes of the pending business income litigation are enormous regardless of the size of the carrier.”
Steven Mikuzis is an insurance agent with Power Risk Management Services, LLC. He is a partner at Mag Mile Law specializing in civil litigation and insurance coverage.
“The types of insurance that cover riot and looting damage would be:
- Most standard property insurance policies would cover riot damage including the policy terminology of civil commotion and vandalism, as typically these are automatically covered with some specific conditions excepted.
- Looting most likely requires some form of ‘theft’ coverage, as looting would typically not fit within the definition of vandalism. Vandalism means they damaged the building or contents but didn’t take anything. Looting fits the definition of theft, burglary, or possibly robbery.
Many business owners have been impacted by the coronavirus because the business had to temporarily or permanently shut down and, just as important, all business policies exclude (do not cover) the loss of business income. Viruses, pandemics, and most other similar, non-physical conditions are specific exclusions in most, if not all, property policies.
Property policies require physical damage to the building or contents to trigger coverage and only then can your presented ‘loss’ be considered for a business interruption claim. The exception to an indirect circumstance would be the building down the road that sustains damage and civil authorities prohibit entering that area which, in turn, creates a loss of income for the business owner since no one, including potential customers, is allowed into the detoured area.
Most property policies contain the clause and limit the exception to a business interruption claim for a two-week period. The impact of riot damage and the coronavirus is potentially significant for each circumstance.
While widespread across the country, rioting can cause disruption to specific locations and communities in the form of moratoriums on property coverage. The people getting ready to close on a house or commercial building might find it difficult in obtaining the necessary coverage until the moratorium is lifted.
Additionally, even not-at-fault claims can be taken into consideration when buying or renewing insurance, so if you were affected by riot damage or looting, it most likely will show up on your claim history and can impact your premium, deductibles going forward, and your acceptability when shopping around for different coverage and pricing.
Property Insurance and Liability
While the coronavirus is being debated on the property insurance and liability insurance fronts, the entire industry is holding its collective breath. Most estimates indicate little to minor impact to COVID-19 as it stands, but in the event of legislation to the detriment of the industry, the estimates then lean toward massive to complete devastation of the property and liability insurance industry.
On the property side, the main issue is business insurance in the form of business interruption or loss of income coverage. The restaurant that was coming off of a great year in 2019, all of a sudden went to zero sales with staff layoffs and the inevitable closure.
Pandemics and viruses are excluded in all policies. If those became a covered cause of loss, many think the lost income claims could exceed the recently issued federal government dollars.
Insurance industry insiders are suggesting coverage be implemented through a program similar to a FEMA flood plan, while others suggest charging for business interruption or loss of income coverage and removing the exclusionary language. The impact on business owners’ bottom lines could be significant, if not unaffordable.
In the meantime, coverage remains unobtainable. In southwest Ohio, in my town of 60,000, protesters and rioters caused minimal disruption and relatively low levels of damage, estimated to be $75,000 to $100,000. Add to that the cost of overtime of law enforcement and emergency repairs for boarding of buildings.
Numerous panes of glass were damaged in business and governmental buildings, in addition to municipality vehicles. Streets were closed, law enforcement was in-place and several arrests were made, in addition to curfews set for two nights. Fortunately, only minor injuries were reported.
Law enforcement handled the situations and their presence helped keep the disturbance to a low level and they attributed most of the problems to a select few, ending in their arrests.”
P.J. Miller is an insurance agent and partner at Wallace & Turner Insurance. This locally owned insurance agency provides business, life, and health coverage.
“The damage to a business and its contents within that is a result of fire, riots, civil commotion, or vandalism are usually covered under a ‘Business Owners Policy’ (BOP). BOP insurance typically combines both property and liability coverage into a single policy.
The damage to windows, doors, fixtures, and business movable property are typically included in a BOP. BOP may also cover for any lost income that results from events that temporarily halt the operations of the business.
A business owner may also want to speak with their landlord to learn of any insurance coverage held by the landlord for the property damage, as there may be an optimal way to file claims that seek reimbursement.
Even though an insurance claim may be permitted for some damage as a result of riots or looting, it is highly unlikely that most businesses can receive compensation from their BOP due to the pandemic.
The ability to insure against the risk of a pandemic is typically excluded in business interruption insurance because insurers well understood even before COVID-19 that the financial cost of a pandemic is not quantifiable. It has been estimated by some insurance analysts that property/ casualty losses from the recent riots could top $2 billion.
The impact of the coronavirus on the insurance industry is much more difficult to calculate at this stage. Many BOP policies have very carefully worded exclusions for pandemic-related claims, but this does not mean that all claims will be unsuccessful. The specific scenario and claim will need to be analyzed to determine whether the event is covered by the policy.
A business that shuts down due to a decree from the government will probably not trigger a business interruption clause. A business that closes due to fears that an infected worker may contaminate business equipment, could potentially trigger a business interruption clause.
The impact of the coronavirus on the property/casualty industry is still largely unknown. There are many business owners in New York City that are sympathetic to the protests. As such, many businesses are offering free food and beverages to the protestors in order to demonstrate solidarity.
That said, all business owners that I have heard simply draw the line at looting and riots, and there is little expression of support for any unlawful activities. Many businesses in New York City and surrounding boroughs have boarded up their windows to deter looters and rioters.
Shopkeepers are trying to prevent easy access to the property, with some businesses having even hired private armed guards and dogs that are ready to respond to a break-in.”
David Reischer, Esq. is the founder and CEO of LegalAdvice.com. David is a licensed accident attorney with over 15 years of legal experience.
Commercial Insurance for Riots and Why the Damage Might Be Worth It
While some may view them as necessary, there’s little doubt that riots have damaged small businesses across America. Rioters have broken windows, stolen merchandise, set fire to property, and created a sense of mayhem.
Fortunately, in situations of riots and commercial insurance or strike, riot, and civil commotion insurance, business owners are typically covered for their losses. There are some business owners who understand the sentiment and emotions behind these protests and riots. This includes small business owners in Minneapolis. They have said over social media:
Property can be replaced. A life cannot. In George Floyd, we lost another black American to the hands of police brutality and racism.
There is the hope that long after business owners repair their shops and life begins its usual routines, that this loss of life is never forgotten. The specter of racism still looms large in American society and each of us who is not black must do our part to eradicate it, lest this situation happens again and again.
Business owners looking to protect their property should regularly comparison shop to ensure that they’re getting best rates and best coverage. Begin your search today for the insurer by entering your ZIP code into our free insurance comparison tool.
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Frequently Asked Questions: Commercial Insurance and Riot Damage
While we have covered a great about commercial insurance in this article, there are always a few questions after the fact. Here are a few of those questions, some of those asked the most either about commercial insurance or are about insurance related to riots.
#1 – Are riots covered by insurance?
Commercial insurance almost always covers damage caused in a riot. This includes whether the government labels these situations as a riot or a civil commotion. If you’re a business owner looking to file a claim, your best bet is to protect your store from further damage, read your policy, and take the necessary steps to file a claim with your insurance company.
#2 – What is riot insurance?
Riot insurance is a type of insurance typically found in homeowners or commercial insurance. Insurance companies often lump it together with civil commotion, as both are roughly the same event. Different courts around the country define a riot or civil commotion differently. In general, both require that a certain number of people get together for the purposes of committing an unlawful act.
#3 – Does insurance cover civil unrest?
Yes, homeowners and commercial insurance policies generally cover riots or civil commotions. The general cause of these two events is civil unrest. There is one caveat when it comes to homeowners insurance, however. Sometimes there are exclusions to this type of coverage if the dwelling has been vacant for a certain amount of time. It varies by insurance company.
#4 – What is the difference between riot and civil commotion?
For legal purposes, riots and civil commotion have one particular difference: the size of the group. Many legal systems classify a riot as having fewer people than a civil commotion. The purpose of both situations is to cause mayhem and commit unlawful acts. For the sake of insurance, often there is no particular difference. Insurance companies frequently bundle both terms under the same peril.
#5 – What is not covered in car insurance?
Car insurance covers a wide spread of incidents that might harm your car or another car if you were to hit it. Most car policies are grouped as liability coverage or property coverage. Liability is the coverage you need to cover the damages to another car if you hit it and are at fault. Property coverage includes types like collision or comprehensive. In the situation of a riot or civil commotion, comprehensive kicks in if your car is damaged.
#6 – What is the purpose of business interruption insurance?
Business interruption insurance is there to protect your pocketbook if some event forces your business to close. Often, the threshold for approving a claim is physical damage. For instance, something must happen to your business physically for your business interruption insurance claim to be approved. An example is if a tree fell on the roof of your store and you had to shut the store down.
#7 – Do businesses have insurance for looting and riot damage?
Many of the perils of a riot are rolled into general insurances like a riot or civil commotion insurance. If you have commercial insurance, you are almost certainly covered during events like a riot or civil commotion. These insurance plans include looting damage if some of your merchandise was stolen.
#8 – What type of insurance covers car theft?
In a car insurance policy, the comprehensive insurance coverage covers car theft. Comprehensive insurance coverage is often labeled “anything but collision” and covers everything from car theft to weather damage. It also covers damages to a riot or civil commotion.
Methodology: A Study of Riot Damage and Commercial Insurance
In this article, we relied on three primary sources of information. Two of those are leading resources of data for insurance: the Insurance Information Institute (III) and the National Association for Insurance Commissioners (NAIC). The third is AM Best, which we used for financial strength data in the five largest companies section.
We used the III for general information about commercial multiple peril insurance. From the NAIC, we collected data about the statistics behind the five largest commercial multiple peril insurance companies.
Data included direct premiums written, market share, and loss ratio. For the financial health of the five largest companies, we turned to AM Best. From it, we gathered each company’s financial strength rating.
Together with the NAIC data, we created a picture of each company’s position in the market, their statistics in relation to one another, and each’s financial health.