Generally, commercial insurance policies do cover damages from civil unrest unless there is a specific exclusion. Most property insurance policies for businesses specifically mention riots. In the wake of the recent protests, many companies that have suffered losses are requesting that their policies cover the damages due to looting, vandalism, riots, and civil commotions.
Provided your policy does cover civil unrest, there are two basic damage issues insurance companies will review. The first damage issue is property damage – the cost to repair damaged property or fully rebuild the property. The main questions will revolve around the value of the physical property and the cost to repair. Ideally, policies cover replacement costs and not just the value of the property at the time of the damage. If the damage is extensive, the repair or rebuild costs can be much more than the value of the property.
Business interruption damage
The second business damage insurance issue is business interruption loss. Business interruption insurance generally covers:
- The cost to run the business from a new location while repairs are being made
- Lost profits because the business isn’t fully operational
- Overhead expenses such as mortgages, insurance, utilities, and license fees
- The cost to notify customers and consumers about the reduced operations
- The cost to get the information technology systems up and running
- Paying furloughed employees
- Other related economic losses
Generally, lost income is analyzed by reviewing how much revenue the business generated before the business interruption (BI) occurred, what the normal expenses were, the type of business, and other factors. BI losses usually involve analyzing past company tax returns, profit and loss statements, and other financial and accounting documents.
How COVID-19 affects a civil unrest business interruption claim
According to Business Insider, the combination of civil unrest and COVID-19 complicates how business interruption losses will be calculated. Due to COVID-19, some businesses that provided non-essential services had already ceased operations or were operating remotely, which drastically altered the businesses’ revenue and expenses.
Many insurance companies have denied business interruption loss coverage due to COVID-19 because there is no physical property damage to the property, a precondition for property damage and for business interruption loss. Litigation is already happening regarding whether property damage insurance covers COVID-19, even if the business was forced to stop operation due a civil order from the government. If property damage is covered for COVID-19, then the business should be able to seek full business interruption losses based on the records from prior years.
Is BI loss due to civil unrest or COVID-19?
If, however, business interruption loss wasn’t covered, then insurance companies are certain to argue that a good part of the business interruption losses were due to COVID-19 and not to civil unrest. Complicating the value of business interruption losses is that many businesses were just starting to open up again when the protests and civil unrest began.
Small business owners and large business owners will need to work with experienced insurance dispute lawyers to fully document their income losses as well as argue on what your losses should be based – from when the business was up and running as opposed to what a new business would earn, which is likely to be considerably less.
In addition, the value of business interruption losses may depend on the location of the business, whether there was a civil authority order and coverage, waiting periods for filing claims, deductibles, and other insurance issues.
At Warhurst Law, attorney Gene Warhurst tackles the complex cases. He understands both sides of the insurance claims dispute process because he worked for two of the largest property and casualty insurance companies (the Hartford and USF&G) before dedicating his career to protecting clients from insurance bad faith. He understands the ins and outs of insurance policy language, the current insurance laws, the various ways to document property damage, business operation losses, relocation expenses, and other economic losses.
To speak with an experienced insurance litigation attorney who understands how to handle civil unrest and COVID-19 claims, call Warhurst Law at 251.207.1296 or fill out our contact form to schedule an appointment. We fight aggressively for every type of business and for homeowners throughout the Southeast, including Alabama, the Florida panhandle, and Louisiana.
* Warhurst Law cannot and does not guarantee an outcome to any case.