Riots, protests, and civil unrest can cause serious or permanent damage to a business and its physical structure. Most general liability and homeowners policies include this provision, but with our current state of affairs, it may be wise to confirm with your agent.
Below is a transcript of the episode, modified for your reading pleasure. For more information on the topics discussed in the episode, see the links at the bottom of this post.
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Grant FINLEY: Welcome back to another edition of Your Insurance Connection Podcast. I'm your host, Grant Finley, joined once again by Chuck Hembree, the President of CLH Insurance. Chuck, nice to see you today. How are you?
Chuck HEMBREE: Good to see you. Spring is coming out and it's a welcome sight.
FINLEY: Absolutely right. I'm not one for winter, so spring is always a welcome sight for me. Today I wanted to talk about civil unrest and riots and protests. Anybody who has watched the news the last few months has probably seen one or more protests or marches or things of that sort on their television and it seems topical so I thought it would be a good topic. And certainly anyone who has lived in the state of Missouri in the last few years is probably familiar with what happened in Ferguson. It's certainly top of mind for some folks around here and it just makes sense I think. So, let me just start by asking: do you know what the insurance definition of a riot is? What would have to happen for that part of your coverage to kick in?
HEMBREE: Well, it's a common coverage that's in most all of our policies. There may be the very, very most simple policies like a dwelling policy one might not have that, but virtually every kind of policy that you or I would have, either business or personal, includes the peril of civil unrest or riot in the policy. We don't need an endorsement to add that on. It is automatically covered for those types of perils.
FINLEY: I feel like this is pretty - I mean, it's clear. If you see a riot, you know what a riot is, but is there certain language that would say, "Oh, it might look like a riot but it wasn't really a riot, so we're not going to cover the claim." Does something have to happen for it to be considered civil unrest?
HEMBREE: Well, usually you're going to have a group. There's a group involved, but other than that, no. The definition is pretty broad and encompassing. Now ultimately, if there was a question about whether this was a riot or not, it would go to the court system because insurance is a legal document and it has to be interpreted by the courts and they're pretty broad in their interpretation of what a riot or civil unrest would be. It would take quite a bit for an insurance company to say, "No, this isn't a riot and it's not covered underneath our policy," and even if they did that because of a group, then it would be down to vandalism and property damage that way. Well, that's covered underneath most policies as well. Insurance companies are pretty much on the hook whether its for an organized or disorganized civil action or riot or if it's simple vandalism.
FINLEY: So let's say, for example, the Women's March or some of these other marches that have been taking place - they're all positive, they're not violent or anything, but say I have some property and something does get damaged, is that going to be vandalism then or can I say, "ah, there was this protest and my property got damaged," or, does there have to be malice involved?
HEMBREE: Yes. Yes, there does. A protest can be a peaceful protest and that's hopefully how we see it. They're trying to make a statement. When we get to riot or civil unrest is when that protest gets out of hand. Very much like the difference between a friendly fire and a hostile fire. A friendly fire inside of the fireplace warms us. It's when it gets out of its place and isn't used for its normal use and starts to cause damage that it becomes a hostile fire. Same way with this. When a protest is done correctly, it won't result in injury or property damage. And if there's incidental property damage because someone accidentally knocks over something, that group or a person's general personal liability or general liability will cover that property damage or bodily injury that they might cause.
FINLEY: So, you said this riot - it's in just about everything. So that's a general liability, that's a BOP, that's a homeowners?
HEMBREE: Any property damage coverage will include damage to your property due to civil unrest and so forth. Liability will cover if you caused it to a third party and they will be less likely to cover it there. So let's talk about the difference there. Why would we cover it under property but not underneath liability? Underneath property, it's damage to our own property because of civil unrest and all policies that are of any breadth have the definition in there that will cover that. But let's say we cause that because of our actions, we are part of a riot and we cause property damage. Our own personal liability or any organization that might have sponsored that march and it gets out of hand, their liability will not cover that property damage because that's an illegal act and we cover legal liability.
FINLEY: Makes sense. So, then for the property coverage, property damage obviously is the main one there, but is there anything else, business interruption or anything that would come into play with this riot coverage?
HEMBREE: Well, again, it depends on how good of coverage we put together. Let's say we are a business and we were in Ferguson. We were affected by the actions there. There are several things that can come into play. Obviously if we had damage to our building like several buildings were damaged. The QuikTrip there was totally destroyed. Their property policy would respond and rebuild and repair that facility. But you brought up some good things, it's burnt to the ground so there's no income. So what do we do with all the employees? What do we do with the lost revenues? Can we insure against those? Well, yes we can. We can do a couple of things. We can add on coverage there that will cover that business interruption or extra expense to get us back up and running again and it has to be due to a covered peril. Well, thank Heavens, civil unrest or riot is a covered peril and so our business interruption would respond to it. Where we have a problem is when our property is not damaged and there is no covered peril that caused it, then we don't have any right to get to our business interruption or extra expense.
FINLEY: So, what if my business is next to the QuikTrip that was burned down and say there is damage all over the place and it's preventing people from getting to my business. Can I get anything out of that or am I out of luck?
HEMBREE: There, that's a real grey area because we didn't have any damage to our personal property. We would probably not have any recourse to business interruption or extra expense. The only small chance that we might have is if we would have added onto our policy, dependent property coverage. We depended on that QuikTrip for traffic to our business. Now, we don't normally see it like that. We'll usually see that as an anchor tenant in a big mall. Macy's catches on fire, so people aren't coming to the mall. It didn't damage our store but now we have less foot traffic and our income goes down because of a covered peril to that particular dependent property. We can cover for those types of situations.
FINLEY: Yeah, that's a much better example. So say I don't want to go to Ferguson because I'm just - and I hate to be picking on Ferguson but since it happened it's the best example, relevant to us, but say I don't want to go to Ferguson because I'm afraid that something's going to happen, that there's just going to be violence or - I don't want to be in that environment, so I stop shopping where I normally shop. So, now as a business owner, my traffic is going down. Less people are coming because they don't want to come to town. Nothing happened to my building but people are afraid to shop here when they used to shop here and my revenue's affected. Can I claim because these riots took place here, it's affected my business in one way or another, even though there's no physical property damage? Do I get anything or am I -
HEMBREE: Not really. In fact, that's kind of a tough one there. That's why we want to overcome the stigmas that are there and support the community as best we can. But there isn't any insurance for those properties without any physical damage or without having business interruption or dependent property coverage in place. It's much like what would happen if they closed won our street because they're going to repair our street, but because they closed it off, now people can't get to my store. It's a horrible thing, but unfortunately there is no recourse because there was no accident, there was no property damage to the actual facility or to my business.
FINLEY: Now, is there anything you could do in the event of that? Obviously, riot, as we've talked about wouldn't take care of that, but is there anything that a person could insure for if something like that happened?
HEMBREE: Not really, unless they went to an excess carrier and they manuscripted. There's no real forms out there that normally cover this type of thing. There's where you'd want to contact the city or municipality to help you through that situation.
FINLEY: So, we talked about homeowners a little bit, but I'd be remiss if I didn't at least bring one question about it specifically, so if the riot - I can remember seeing on TV fire all over the place, people are throwing things. Say it spills into a neighborhood and my house is gets damaged because of it. That's going to be 100% picked up by the homeowners then?
HEMBREE: Absolutely, and we saw that happen. I thought it curious because there were several news reporters that talked with attorneys who said, "No, riots aren't covered and so these people are on their own." No, if they have insurance, even the more simple forms, there's a 90% chance they're going to have the coverage to repair the damage that was done to their property.
FINLEY: What if my car is parked on the street? Is my auto policy going to pick that up then if it's damaged?
HEMBREE: Well, it depends on what type of coverage you have. Do you have just liability only because your car's older and it doesn't make sense to carry physical damage on it and you don't have comp collision? Then no, you're not going to have any coverage. But if you do have comprehensive coverage, it picks up that peril whether it's vandalism or whether it's a riot or civil unrest. So, it will be covered if you have comprehensive and collision or physical damage coverage on your vehicle.
FINLEY: Let's venture into a grey area. We kind of talked about the legal system a little bit, but say the Police Department is sued for acts perceived as too aggressive, or whatever it might be in some of these civil unrest - would the Police Department have any protection then in this type of scenario?
HEMBREE: They could. Generally Police Departments are connected with a municipality and part of that municipality's coverage would be to cover the police and its actions and they're going to have general liability just like we have in case they accidentally do something. But what we're talking about here is if they would be accused of intentionally causing bodily injury or property damage. They could possibly have some if they have professional liability. So let's say the police were accused of not being out in force or not protecting and the result was more bodily injury or property damage, or they were so aggressive that they acted outside of their professionalism and they instigated more property damage and bodily injury because of the riot situation. Then their professional liability could come into play and that police board or the department itself could have some protection, but there again, the courts are going to bring that action and determine what the cause was and if - I can't imagine a municipality would be without that coverage, but if they were then there would not be any coverage under just general liability for that.
FINLEY: Alright, I'm going to leave you with one more and this one is pretty new still, so I don't know if we'll have a hard and fast answer with this one. I saw in, I believe it was Arizona, they're trying to pass a bill that would make it where the city could take money from your person, your account if you are found to have instigated a protest and the protest turns into a riot or civil unrest and if you are behind that then they can seize your assets. Is there any type of protection a person could have that would prevent that from happening?
HEMBREE: I am not real familiar with the Arizona thing, but I think their specific thing was to be able to get into the bank account and withdraw it from your savings and so forth, which is different than selling off your house or repossessing your car. There there would be no coverage and the reason is, remember we're talking about insurance and insurance covers legal liability. When we get into dishonest acts into illegal acts, none of those are covered for two reasons. They're illegal, so they're not legal liability and second of all, they're done intentionally. They're not done, generally, as the result of an accident, so those are not insurable events.
FINLEY: So, just to tease this out a little bit further. If I want to have a rally to restore peace and sanity and it's supposed to be peaceful and somebody shows up and they have different intentions and then they cause damage, because I put it on, they're going to seize my assets. I didn't have any preconceived notions of doing anything illegal. So, I don't know, like you said that will probably go to a legal system and they'll try to figure it out, but -
HEMBREE: Yeah, and that's where the courts are your friend and your foe. They can be your friend because they can say, "Look, the intention of this was not to go and have an outbreak of violence. The intention was good, but you may have acted negligently. You didn't provide proper oversight so it got out of hand," and that is covered underneath general liability. But if you were involved in the illegal acts and so forth, you would have no relief underneath the general liability policy.
FINLEY: Well, it's interesting and I have a feeling we're only going to see more and more of these protests. Hopefully they're peaceful, but it seems to be - the sixties are back and people are out there protesting. So, if you go out and you protest, awesome, use your voice, but be peaceful because we don't want to see anybody getting wrapped up in this riot or civil unrest. Unless you have any closing thoughts, Chuck, I think we can probably wrap it up.
HEMBREE: Nope, thank you, Grant.
FINLEY: Alright, thanks a lot and we'll catch you on the next episode.
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Show Notes - Where you can learn more about the people and ideas discussed in this episode.
Arizona Senate Bill 1142