DOES INSURANCE COVER RIOTS AND LOOTING?
The hottest topic in insurance circles is whether property damage from recent riots and looting is covered by insurance. Like coverage of damage arising from COVID-19 business closures, the immediate but unsatisfying answer is “it depends”. This article is to give a framework for understanding whether your business or homeowners policy may provide coverage.
Figuring Out Coverage
There is only one way to figure out coverage: obtain a certified copy of the insurance policy and read it. Verbal statements by otherwise friendly agents are incomplete. Summary statements by claim adjusters are incomplete. Summary letters by claim managers are incomplete. The one document that provides a thorough understanding of coverage is the complete insurance policy.
So often property owners ask for their policy and receive the declarations pages. While the declarations pages are important they are incomplete. To understand coverage property owners need all forms that comprise the insurance policy. Each form is listed within the declaration pages by number. When a property owner asks for a certified copy of the policy the insurance company then certifies it has delivered the complete policy.
Policies typically begin with a broad statement of coverage that would encompass every sudden, unexpected event. Policies then narrow coverage by excluding certain events. Some policies will exclude riots or any civil commotion, while others will include coverage. The only way to understand your policy is to read it.
FORUMS FOR DISPUTES WITH INSURERS
Amount of Loss
Disputes with an insurance company do not always result in a lawsuit. Policies that encompass the peril of fire usually trigger a state law obligation to send disputes regarding the amount of damage to appraisal. Appraisal in this context is an out-of-court dispute resolution process that is similar to arbitration. For a summary of this process click here. In it many states the cause of loss ought to also be resolved in appraisal. Many amount of loss disputes arising from rioting or looting may be decided in appraisal pursuant to form policy language mandated by the government.
Coverage
Disputes that arise from interpretation of the insurer’s policy will result in a lawsuit. Whether a policy provides coverage of rioting, looting or civil commotion will be decided by a judge.
Many insurance policies make a distinction between rioting and burglary, with one covered and the other excluded. One homeowner’s policy expressly includes coverage of “Riot or Civil Commotion, including direct loss from pillage and looting during and at the site of the riot or civil commotion.” A few pages later coverage of riot or civil commotion is excluded from personal property coverage. Riot or civil commotion coverage specific to trees, shrubs, plants and lawns is limited to 5% of the limits for Coverage A (dwelling coverage).
Another policy includes riots or civil commotion within the definition of a “specified causes of loss”. Damage due to a collapse is covered if caused by a “specified cause of loss”, along with fungi, mold, etc. Fungi and mold coverage is limited to $15,000. Pollution caused by a “specified cause of loss”, and thus riots, is excluded. Outdoor property damage is covered but with limits of $2,500. This kind of policy allows insurers to argue a riot or civil commotion does not fall within the broad statement of coverage at the outset of the policy because it is so often addressed and qualified throughout the policy.
Because coverage between insurers is all over the map we can anticipate insurance company denials or reduced pay-outs. Public adjusters and lawyers are going to have to closely and thoughtfully review the policy to understand the full scope of coverage. I recommend property owner advocates carefully review the sections or forms that speak to covered causes of loss. Remember the broad statement of coverage at the outset of the policy controls unless specifically excluded elsewhere in the policy.
FINAL THOUGHTS
Rioting or civil commotion claims will follow a path similar to more common claims like fire and hail claims. There must notice of a claim, the property owner ought to send a written statement of the loss, the insurer might insist on a proof of loss, and other procedures. For a further understanding of these procedures click here.