Following the deaths of George Floyd, Breonna Taylor, Ahmaud Arbery, Tony McDade, and Rayshard Brooks, protests against systematic racism in general, and police brutality in particular, have swept the globe. These protests have largely been peaceful, but a small, fractious group of individuals has used the protests as cover to incite violence, damage property, and loot businesses. While it might be cold comfort to the affected business owners to hear that property damage is not the norm, most have insurance that protects their pecuniary interest.[1]
First-party property insurance policies generally include riot and civil commotion as covered causes of loss, unless there is a specific exclusion in the policy. Although courts have acknowledged that defining a “riot” can be difficult because they can vary in size, courts have identified at least four elements:
- unlawful assembly of three or more people (or lawful assembly that due to its violence and tumult becomes unlawful);
- acts of violence;
- intent to mutually assist against lawful authority where “lawful authority” is not limited to official law enforcement, but extends to those whose rights are or may be injured and who seek to protect those rights; and
- some degree of public terror (i.e., any minor public disturbance does not rise to the level of “riot”).
Blackledge v. Omega Ins. Co., 740 So. 2d 295, 299 (Miss. 1999).
Civil commotion likewise is undefined in most property policies. As a starting point, the term necessarily means something other than “riot,” since each term in an insurance policy is presumed to have its own meaning. See, e.g., Portland Sch. Dist. No. 1J v. Great Am. Ins. Co., 241 Or. App. 161, 171 (2011). Thus, while “civil commotion” may be similar to a riot, courts have construed the term more broadly, finding that civil commotion entails “either a more serious disturbance or one that is a part of a broader series of disturbances.” Pan Am. World Airways, Inc. v. Aetna Cas. & Sur. Co., 368 F. Supp. 1098, 1138 (S.D.N.Y. 1973), aff’d, 505 F.2d 989 (2d Cir. 1974). In fact, most property policies contain no limitation on the breadth of commotion or the type of harm that it might pose to person or property.
In many policies, riot, civil commotion, vandalism, and malicious mischief are “specified causes of loss.” The practical effect of this designation is that numerous exclusions will contain exceptions for loss caused by these situations. For example, while damage to a business’s electronic data may be excluded, the exclusion may contain an exception for damage to electronic data resulting from specified causes of loss, such as riot or civil commotion. Similarly, even where the policy contains a pollution exclusion – purportedly excluding loss, damage, cost, or expense caused by or contributed to or made worse by the release of “pollutants,” which could include tear gas – that exclusion may not apply to loss or damage caused by riot, civil commotion, or vandalism.
If a policy covers riot or civil commotion, covered losses may include property damage to the building and its contents, and lost income while the building is under repair or subject to government orders affecting the business’s operations (e.g., curfews limiting hours of operation) where the order is the result of property damage elsewhere. Business insurance policies may also cover costs incurred in protecting insured property from future, imminent harm or continued damage. These costs might include hiring (or increasing) security personnel, boarding up windows and doors, securing inventory in place or moving inventory and operations off-site.
Prior to the riots in Minneapolis, Minnesota, the costliest U.S. civil disorder occurred after the acquittal of police officers involved with the arrest and beating of a black American, Rodney King, from April 29 through May 4, 1992, causing $775 million in insured losses.[2] More recently, there were approximately $24 million in insured losses following the death of Freddie Gray, a black American who died in police custody after suffering a spinal cord injury.[3] Insured losses are not yet available for the riots in Minneapolis, but the Property Claims Services (“PCS”) unit of Verisk Analytics designated the event as a catastrophe. On June 4, 2020, PCS included over 20 other states, making the civil unrest that started in Minnesota a multi-state catastrophic event.[4]
If your business has experienced or may experience a loss because of civil unrest or riots, you should begin keeping track of these losses – and costs incurred to avoid them – immediately. Save receipts and inventory damages. Contact your insurance company as soon as you experience a loss to report your claim and diligently log your interactions with your insurer and its representatives. If you feel your insurer wrongfully denied your claim or delayed payment, contact experienced insurance coverage counsel.
[1] The authors by no means intend to equate property damage and a lost life. Quite the opposite. One is recoverable (and insurable); the other is irreplaceable.
[2] https://www.iii.org/fact-statistic/facts-statistics-civil-disorders (last viewed June 15, 2020).
[3] Id.
[4] Id. By June 4, 2020, at least 40 cities in 23 states had imposed curfews. National Guard were called in Washington, D.C. and at least 21 states.
