Is looting covered by insurance? Depends on the business
Protests over the police killing in Minneapolis of George Floyd continued in cities across the country. Looting has accompanied some of the protests. Many businesses were already struggling with slashed revenue and dismal earning prospects under the continuing COVID-19 pandemic. But how and whether they bounce back from shattered windows, stolen merchandise and burned-out buildings hinges on one factor: their insurance policies.
Business insurance is similar to consumer car insurance: Basic liability is required by many landlords (though not all) in a lease agreement, protecting proprietors in the event that they face lawsuits from customers who are injured in their stores, among other legal claims. But it may be up to the individual business owners to decide how much insurance they want to buy to cover their inventory and equipment in case of theft, fire and other scenarios.
Large chains such as Target, Starbucks and Apple use their deep pockets to buy sophisticated policies that cover the entire chain for losses stretching into the millions of dollars, according to Janet Ruiz, director of strategic communication at the Insurance Information Institute.
Business insurance is similar to consumer car insurance: Basic liability is required by many landlords (though not all) in a lease agreement, protecting proprietors in the event that they face lawsuits from customers who are injured in their stores, among other legal claims. But it may be up to the individual business owners to decide how much insurance they want to buy to cover their inventory and equipment in case of theft, fire and other scenarios.
Large chains such as Target, Starbucks and Apple use their deep pockets to buy sophisticated policies that cover the entire chain for losses stretching into the millions of dollars, according to Janet Ruiz, director of strategic communication at the Insurance Information Institute.
But for smaller businesses, the amount of coverage can vary widely in terms of deductibles and dollar limits, depending on the type of business, the value of the inventory and the depth of an owner’s pockets. Since not all landlords require businesses to insure their inventory and equipment against loss, some local owners will end up having to cover all of the losses and repair costs on their own.
However, for businesses that purchase property coverage, it usually includes losses from civil disturbances. For those who are insured, packages that include liability and property coverage can cost on average $1,200 a year for a small business with up to 100 employees and $5 million revenue, Ruiz said, adding that “it depends on how much they are willing to spend if they have a loss.”
Restaurants, whose kitchens pose fire risks, may have to pay for insurance covering their equipment at a higher rate than retail stores where customers peruse racks of clothes.
The losses suffered by business due to the pandemic are excluded from typical business policies, though some carriers started offering them following the SARS pandemic in 2003, Ruiz said.
“There were companies that crafted them, and they didn’t sell,” she said of such policies. “It’s expensive.”
Until this weekend, the two most costly civil disturbances in the nation’s history occurred in Watts in 1965 and Los Angeles in 1992, following the acquittal of four police officers in the beating of African American motorist Rodney King.
The 1992 unrest was the most costly in U.S. history, causing an estimated $1.4 billion in property damage in today’s dollars, according to the data analytics provider Verisk Analytics and the Insurance Information Institute. The Watts unrest resulted in $357 million in damage, similarly accounting for inflation.
The cost of this week’s unrest has yet to be tallied — but in many cases, insurers will likely be stuck with the bill.
In California, Insurance Commissioner Ricardo Lara called on insurers to move quickly to help affected businesses recover from the riots.
“Commissioner Lara is expecting adjusters to be on the ground as soon as possible to help any looted businesses quickly access their insurance benefits,” said Michael Soller, spokesman for the state insurance department.
Lara also will be making a determination on whether to issue an emergency declaration that would allow insurers to use out-of-state adjusters to speed the process, he said. This was done in 2018 following the Camp and Woolsey fires, when the scale of the damage overwhelmed insurers.
Businesses affected by looting should contact their insurance companies about the grace periods and premium rebates. Because of the commissioner’s actions, they should have more time to pay premiums and can qualify for lower rates; they can contact the Department of Insurance for assistance in submitting claims or with questions about their coverage.
You should check with your agent to see if your policy covered Civil Disorders.