Property Coverage for Riots, Vandalism, and Civil Commotion

Businesses located in urban areas may suffer property losses due to riots, civil commotion, or vandalism. Many business owners learned this the hard way in the spring of 2020. On May 26, riots broke out in Minneapolis after an unarmed Black man died in police custody. Between May 26 and June 8, the riots spread to 140 other U.S. cities. The civil disorders that occurred during that two-week period caused an estimated $1 billion in insured losses in more than 20 states.

While civil disturbances and vandalism are significant risks for many businesses, business owners can protect themselves by purchasing commercial property insurance. Riot, civil commotion, and vandalism are covered causes of loss under virtually all commercial property policies.

What Constitutes Riot, Civil Commotion, and Vandalism?

Most property policies don't define the terms "riot," "civil commotion," or "vandalism." Consequently, insurers and insureds may construe these words differently. In disputes between insurers and policyholders, courts often rely on common dictionary definitions or previous court decisions to determine the meanings of these terms.

The word "riot" generally means an unlawful disturbance of the peace by a group of three or more people who act in a violent manner that threatens the public or an institution. A civil commotion is similar to a riot but it involves more people. The word generally means an uprising by a large number of people who cause harm to people or property. Riot and civil commotion can be difficult to differentiate so the perils are often listed together. Vandalism refers to the intentional destruction of someone else's property, with an example being graffiti.

Financial Impact on Your Business

Riots, civil commotion, and vandalism can impact your business in several ways.

• Rioters or vandals may cause physical damage to your building or business personal property.
• Rioters may break into your premises and loot your personal property, including your inventory or merchandise.
• You may lose income if rioters or vandals damage your property and you can't operate at your normal level (or at all) until the repairs are completed.
• You may suffer an income loss if property near your premises is damaged and a civil authority closes off access to the entire area to protect the public.

Physical Property Damage

If you have insured your business property under a commercial property policy, it should be covered for physical damage caused by riots, civil commotion, or vandalism. These perils are covered under most named perils and all-risk policies.

If your building is damaged, the loss will be insured under your Building coverage. Similarly, damage to your personal property will be insured under your Business Personal Property coverage. Any losses that occur will be subject to the limits (specific or blanket) and deductibles listed on your policy.

Looting (a type of theft) is a covered peril under commercial property policies. The definition of looting varies from state to state but the term typically means theft that occurs during a time of public catastrophe or unrest, such as a flood, riot, civil disorder, or war.

Loss of Income

Income losses your business suffers when rioters or vandals have damaged your premises and you are unable to continuing operating may be covered by business income (also called business interruption) insurance. This insurance covers income you lose while your business is partially or completely shut down and your property is being repaired. Business income coverage is automatically included in a business owners policy. It may be added to a commercial property policy via a separate form or endorsement.

Business income insurance includes a coverage called Civil Authority. This coverage applies when a civil authority (such as a fire department) prohibits access to your premises because property situated nearby has been damaged by a covered peril, and you lose income as a result. For coverage to apply, the damaged property must belong to someone other than you and it must be located within a one-mile radius of your premises.

Civil Authority Example

Suppose you operate a clothing store on Main Street in downtown Pleasant Valley. Your store is located across the street from a popular hotel. Your business is insured under a commercial property policy that includes business income coverage. One day, a peaceful demonstration turns violent and a riot breaks out on Main Street. Rioters throw Molotov cocktails into the hotel, causing a large fire. The fire department extinguishes the fire but the hotel is badly damaged. The fire department shuts down Main Street for six days while the damaged building is stabilized.

The shutdown ordered by the fire department causes you to lose income over the six-day period. Fortunately, your income loss is covered by your civil authority insurance. If your policy includes a 72-hour waiting period, your coverage will begin 72 hours (three days) after the street closure was declared. Your policy will pay for the income you lose during the last three days of the shutdown.

Civil authority insurance typically provides up to four weeks of coverage. You can extend the period of coverage by paying an additional premium.