04 June 2020

Insurance coverage guidance for at risk US individuals and businesses


John A. Farnsworth
Special counsel | US

Across the country, protests that have been peaceful by day have taken a violent turn by night. Individuals and business owners that were working towards reopening have now found their cars vandalized or destroyed, businesses burglarized, looted, and in some cases completed destroyed, and hopes of reopening dashed.

One of the first questions that you may have is whether insurance will cover the damages suffered and the answer turns on whether you have the right kind of coverage. Unfortunately this question often arises after a loss, but asking this question before a loss could make a big difference to individuals and business owners. If you live in or have businesses in areas that are hot spots for rioting and violence, now is the time to confirm that appropriate coverage is in place and to obtain any missing coverage.

Automobiles

Every state except New Hampshire requires its drivers to purchase liability insurance, but insurance to cover damage from a collision or more expanded “comprehensive” coverage is optional. Collision coverage applies to damage to your vehicle from an impact with an object, such as a telephone pole or another car). Comprehensive coverage covers damage to a vehicle caused by other sources. These “other” sources typically include fire, vandalism and rioting. This expanded coverage is optional and it has been reported that approximately 75% of US drivers chose to buy this optional coverage.

Homes, Buildings and Personal Property

Standard homeowners policies will typically cover damage caused by fire, a riot or civil commotion, vandalism and other malicious mischief. This coverage extends not only to the structure, but to contents as well.

Commercial insurance property policies typically provide similar coverage, often referred to as “all risk” policies. Damage to glass, however, often requires a separate endorsement.

Business contents – computers, furniture, supplies, etc.—should be covered if the business has opted for business personal property coverage.

Business Interruption

Business interruption insurance provides coverage for other losses a business incurs when a business is forced to close as a result of physical damage to the property.

These losses typically include:

  • Lost net income
  • Mortgage, rent and lease payments
  • Loan payments
  • Taxes
  • Employee payroll

Business interruption insurance, however, may also provide coverage for businesses that are forced to suspend operations or limit hours due to rioting, vandalism or civil unrest.

The importance of this type of coverage is often overlooked. Many small business owners forgo obtaining this type of coverage to save costs, but this added coverage could be the difference between recovering from a loss or being forced to close down. This is especially true for businesses that are heavily dependent on physical assets, have smaller profit margins, or would be irreparably harmed by a sudden profit loss.

Bottom line

For anyone that lives or works in an area affected by protesting or for anyone that has to park their vehicle in a public place, it’s a good idea to review your auto and homeowners insurance policies, and any commercial insurance policies you may have, to confirm what kind of coverage you have and to add any missing coverage before a loss is incurred.

John A. Farnsworth Special counsel | New York, New Haven, Greenwich

Category: Article