Fox News ran a televised segment about the ability of businesses to collect for lost income and property damage after the recent riots. The good news for most business owners is that the vast majority of all commercial policies will cover the property damage and business income losses caused as a result of these unfortunate incidents. I was happy to be the insurance commentator for Fox News reporting that coverage should be paid for business losses rather than be the bearer of bad news.
Insurance agent educator David Thompson is pretty much in agreement with me and left a comment to my post, What Exactly Is a “Riot” and “Civil Commotion” Under a Property Insurance Policy?:
[T]he damage caused to structures and autos will almost universally be covered by property and auto policies. The debate over ‘riot’ and ‘civil commotion’ is a moot point a vast majority of the time. A vast majority of commercial property policies use the CP 10 -30 Special Causes Of Loss Form. (Commonly referred to as ‘all risk.’) The same goes for a vast majority of homeowners policies; damage to the structure is on an ‘all risk’ basis almost all the time.
As such with ‘all risk’ coverage, you don’t have to look for a covered peril, the insurer has to cite an exclusion. Under standard ISO forms, I see no exclusion that applies for commercial structures or homes. Even if you used the CP 10 – 10 – Basic Causes of Loss Form riot, civil commotion, and vandalism are named perils. Fire is also a named peril, thus the probability of no coverage, even under the CP 10 10 is remote.
I’m smoking 6 racks of ribs this weekend and I’ll put them all on the table with the bet that 99.999% of these recent claims will be paid.
I am going to take David Thompson up on that bet. While there may be coverage which should pay for the riot claims, I seriously doubt that the insurance companies are going to pay 99.999% of what is claimed as owed. That is not what is going on in the field and where the adjustment rubber meets the claims dollars road. There are going to be partial denials, many of which may be significant.
For instance, another commentator to that same post, Sean Chastain, noted the following:
I generally agree David. However, I do have a concern that your bet’s percentage point may be high.
My concern is on the Building and Personal Property Coverage Form, CP 00 10. Under E. Loss Conditions 6, the Vacancy Condition. Vandalism, Glass Breakage, Theft and Attempted Theft are all excluded when the building is deemed vacant. It is deemed vacant unless 31% of the total square footage is either “used by” the owner or lessees to conduct customary operations.
Given that many businesses have been shut down now for more than 60 days (the Vacancy Provisions trigger) due to covid, this could be a serious issue, in my opinion. A shuttered business seems an obvious candidate for the provision to apply. But what about a business that is still operating, but the employees are all working remotely? Is that building still ‘used by’ the owner or lessee to conduct customary operations?
Sean makes a good point. Many public adjusters have also been calling our firm about insurance companies that are willing to pay for the property damage caused by the riots. However, some insurance company adjusters are initially indicating that the business income claims may be denied because the businesses were closed from the pandemic and not operating at the time of the riots. Some insurers are claiming that the revenues expected from the re-openings are speculative and cannot be supported with recent historical sales as a result of the changes to the economy.
I will again repeat “how absurd!” to this type of business income claim analysis which I hope will not result in massive disagreements about much needed money to businesses already harmed by forced closings. As a result of this business income adjustment issue, Kelly Kubiak and I will address how to treat and forecast future income losses in my Tuesday’s at Two With Chip, which you can watch at 2 PM EST with this link. We will also go over notice requirements for Hurricane Irma claims and supplemental claims which have a deadline to report in a few months.
Hope to have you in attendance for the livestream at 2 pm EST tomorrow.
Thought For The Day
I hope the millions of people I’ve touched have the optimism and desire to share their goals and hard work and persevere with a positive attitude.